Ta Ann Holdings - FY12 within expectation

Period  4Q12/FY12

Actual vs. Expectations  FY12 core net profit* of RM64m was within both consensus and our estimates. The results made up 95% of the consensus forecast of RM67m and 100% of our forecast of RM64m.

Dividends  Single tier dividend of 5.0 sen was announced and this is below our expectation of 6.9sen.

Payout ratio has been lower than expected at 32% (against our estimate of 40%).

Key Results Highlights  YoY, FY12 core net profit tumbled 59% to RM64m as the plantation division PBT plunged 44% to RM94m although timber suffered a Loss Before Tax of RM13m (FY11: RM50m PBT). Plantation fell victim to low CPO prices at RM2862/mt (-13%) while timber division products prices fell by 14%-20%.

 QoQ, 4Q12 core net profit tumbled 69% to RM9m as plantation division PBT declined 53% to RM20m. This was caused by extremely low CPO prices of RM2347/mt (-22%). Timber division Loss Before Tax deepens to RM14m due to asset impairment provision of RM13m for its Tasmania veneer mill.

Outlook  Expecting CPO prices to average at RM2500/mt in FY13E which should keep its earnings at low levels of RM63m (-2% YoY).

Change to Forecasts  Maintain FY13E earnings of RM63m which is way below consensus’ estimate of RM109m. Note that our CPO prices estimate is only RM2500/mt. With YTD average CPO prices of only RM2308/mt, we think consensus’ average estimate of RM2950/mt maybe too bullish.

Rating   Maintain UNDERPERFORM

 Potential downgrade in consensus’ FY13E earnings is likely to add pressure to the stock’s share price.

Valuation  Maintain our TP of RM2.84 based on unchanged 1.0x FY13E Book Value of RM2.84.

Risks  Better than expected prices for CPO or timber products.

Source: Kenanga