- We maintain BUY on
Ta Ann Holdings, with a fair value of RM5.20/share, based on a PE of 13x FY13F
EPS of 40 sen.
- 1HFY12 numbers
disappointed, with net profit of RM25mil (-68% YoY) accounting for only 26% and
20% of our fullyear and consensus forecasts, respectively. This was mainly due
to higher plywood losses and a higher effective tax rate (+7ppts to 34.3%). No
interim dividend was declared.
- Regardless, we
believe the company could still make up for the shortfall, on the back of a
much-better FFB production numbers and efforts to mitigate the losses at the
plywood division in 2HFY12.
- We had earlier
lowered our FY12F and FY13F earnings by 21% and 7% to RM95mil (-39% YoY) and
RM150mil (+57% YoY), respectively, mainly to account for the expected higher
plywood losses. The division’s pre-tax loss widened to RM10.9mil in 2QFY12,
bringing the total to RM16.7mil for 1HFY12.
- Management has
guided that the company targeted to minimise losses at its Tasmania outfit by
cutting down on production, while focusing on its profitable local manufacturing
operations in Sarawak.
- The company has
revised its original target of producing and selling 180,000 cu m of plywood to
150,000 cu m for FY13. Plywood made from Tasmania veneer may only account for
roughly 35% of total production from 2HFY12 onwards, as part of its
rationalisation plan.
- We had earlier
slashed our plywood sales volume assumption for FY12F by 16% to 170,000 cu m
from 203,000 cu m previously and by 25% and 35% for FY13F- FY14F, respectively,
to 150,000 cu m and 160,000 cu m.
- We had also raised
the division’s annual pre-tax losses to RM26mil each for FY12F-FY14F vs.
earlier loss forecasts of RM17mil, RM18mil and RM19mil, respectively (-RM18mil
in FY11).
- At its oil palm
division, CPO sales volume in 1HFY12 totalled 30,067 tonnes (-9% YoY), which
made up only 35% of our projected 85,000 tonnes for FY12F. FFB production at
189,347 tonnes (+2% YoY) is largely in line with our expectations, accounting
for 40% of our full-year assumption.
- We had earlier also
raised our FFB volume assumptions by 6%-10% for each of FY12F-FY14F to 500,000
tonnes, 629,457 tonnes and 758,085 tonnes, respectively. We expect production
to improve in 2HFY12, with an upside bias still to our current forecast.
Source: AmeSecurities
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