- We maintain BUY on
Ta Ann Holdings Bhd, but with a lower fair value of RM5.20/share (vs.
RM5.60/share previously), based on a PE of 13x against a further downward
revised FY13F EPS of 40 sen (vs. 43 sen previously).
- We expect Ta Ann’s
results to disappoint in the 1HFY12 numbers, on the back of
higher-than-expected losses for its plywood division and lower-than-expected
CPO prices.
- As such, we have
lowered our FY12F and FY13F earnings by 21% and 7% to RM95mil (-39% YoY) and
RM149mil (+57% YoY), respectively, mainly to account for potentially higher
losses at its plywood division.
- The plywood
division incurred a pre-tax loss of about RM6mil in 1QFY12, which is expected
to widen on the back of a significant decline in ASP – hovering at above US$500/cu
m in recent times but below the US$563/cu m achieved in the first quarter. Our
plywood ASP assumption is at around US$530/cu m (-16% YoY) for each of
FY12F-FY14F, and the export ASP for logs is at about US$208/cu m (-19% YoY).
- We have slashed our
plywood sales volume assumption for FY12F by 16% to 170,000 cu m (-19% YoY)
from 203,000 cu m previously, and by 25% and 35% for FY13F and FY14F,
respectively, to 150,000 cu m and 160,000 cu m.
- Accordingly, we now
expect the division to incur a higher pre-tax loss at RM26mil for each of
FY12F-FY14F vs. our earlier loss forecasts of RM17mil, RM18mil and RM19mil, respectively.
- Lacklustre demand
for wood products due to the slow reconstruction efforts in Japan has
contributed to low prices, while a flat economy there has also affected the building
industry.
- We have also
lowered our CPO price assumption to RM3,200/tonne from RM3,400/tonne previously
for FY12F, and to RM3,300/tonne for FY13F.
However, we raise our FFB volume assumptions by 6%-10% for each of
FY12FFY14F to 500,000 tonnes (+9% YoY), 629,457 tonnes (+26% YoY) and 758,085
tonnes (+20% YoY), respectively.
- We have also cut
our gross dividend forecast to 15 sen/share for FY12F-FY14F, from 20 sen/share
previously (vs. 20 sen/share for FY11).
Source: AmeSecurities
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