Ta Ann Holdings - CPO Price Assumptions Raised

Author: kiasutrader   |   Publish date: Fri, 13 Dec 09:20

---

Following  our  recent  CPO  price  upgrade,  we  are  raising  our  earnings projections for Ta Ann by 8.8% for FY14 and 15.1% for FY15. We lift our SOP-based fair value to MYR4.97  (from MYR4.53).  We continue to like Ta  Ann’s:  i)  improving  prospects  in  the  timber  industry  amid heightening  economic activities in Japan and rising timber prices, ii) a continued rise in FFB production, and iii) a rising CPO price trend.

• Upgrading CPO price  assumptions.  We have upgraded our in-house CPO  price  assumptions  for  CY14  and  CY15  to  MYR2,700  and MYR2,900  per  tonne  respectively  from  MYR2,600  previously.  We maintain our price assumption for CY13 at MYR2,400/tonne.
• Four main factors driving the upgrade. These are: i) a stronger global economy  –  which  means  food  demand  will  continue  to  grow,  ii) Indonesia’s  lacklustre  production  growth  on  the  double  impact  of  dry weather in 2012 and 2013, iii) mandatory biodiesel implementation in the world’s two biggest palm oil producing countries, and iv) production cost to remain flattish-to-lower on significantly cheaper fertilisers following the potash cartel breakup in mid-2013.
• Raising forecasts. We are raising our forecasts for Ta Ann following the 8.8%  price  hike  for  FY14  and  15.1%  for  FY15.  Our  CPO  price assumptions  are  MYR2,700/tonne  for  FY14  (from  MYR2,457)  and MYR2,900/tonne  for  FY15  (from  MYR2,457).  No  change  to  our MYR2,292/tonne assumption for FY13.
• Maintain  BUY.  Post-earnings  revision,  we  lift  our  SOP-based  FV  to MYR4.97  (from MYR4.53),  based on  an  unchanged  CY14 target P/E of 16x for its plantation division and 12x for its timber division.  We continue to see value in Ta Ann on the back of: i)  the timber industry’s  gradually improving  prospects  amid  increasing  economic  activities  in  Japan  and rising  timber  prices,  ii)  a  continued  rise  in  fresh  fruit  bunches  (FFB) production, and iii) a rising crude palm oil (CPO) price trend.

 

 

Financial Exhibits

 

 

SWOT Analysis

 

Company Profile
Ta Ann is mainly involved in the manufacture and sale of plywood, trading of timber logs and cultivation of oil palms.

 

Recommendation Chart

Source: RHB