Ta Ann’s timber division is expected to just breakeven in FY21 compared to its estimated core loss before taxation of RM35 million in FY20.
KUCHING: Ta Ann Holdings Bhd (Ta Ann) is on track to beating expectations with its improving profit prospects, low gearing, and no immediate merger and acquisition (M&A) plans, the research team at Maybank Investment Bank Bhd (Maybank IB Research) observed.
The research house estimated that Ta Ann could deliver its second quarter of 2021 (2Q21) core profit after tax and minority interest (PATMI) of between RM41 million to RM44 million, bringing its first half of 2021 (1H21) core PATMI to RM71 million to RM74 million; meeting 58 to 61 per cent of its full-year forecast.
“2Q21 PATMI will be driven by high spot crude palm oil (CPO) average selling price (ASP) of RM4,063 per tonne (up 79 per cent y-o-y, up eight per cent q-o-q) which will more than offset the decline in fresh fruit bunches (FFB) output (down 10 per cent y-o-y, up 15 per cent q-o-q).
“2Q’s log output has also grown 15 per cent q-o-q (up 14 per cent y-o-y) and likely be accompanied by higher ASPs too.
“Ta Ann is on track to beat ours and consensus full-year PATMI estimates as CPO prices remained lofty in early 3Q21 while entering into seasonally high production months (although below potential due to labour shortage),” it opined.
Furthermore, Ta Ann has also announced that it is optimistic of a turnaround ahead for its timber segment, particularly due to the shortage of raw materials and increase in housing demands in Australia, US as well as other consuming countries.
“Moreover, as all the logs we use as raw materials for our wood-based products come from our sustainably managed MTCS-PEFC certified forest management units, our timber division is well positioned to meet the anticipated demand recovery in plywood.
“This, coupled with the prudent cost control measures we have put in place, are the reasons why we have been able to sustain our logs and plywood production,” it said in a filing on Bursa Malaysia.
Maybank IB Research presently forecast Ta Ann’s timber division to just breakeven in FY21 compared to its estimated core loss before taxation of RM35 million in FY20.
“Coupled with good palm oil prospects, Ta Ann appears poised to beat our/consensus full-year PATMI forecasts,” it added.