KUCHING (MAY 28) Ta Ann Holdings Bhd (Ta Ann) recorded better-than-expected financial results for the first quarter of the financial year 2021 (1QFY21) which analysts say were due to its better timber performance and higher average selling price for crude palm oil (CPO) and fresh fruit bunches (FFB).
The research team at Kenanga Investment Bank Bhd (Kenanga Research) said its 1QFY21 core net profit (CNL) came in at RM28.5 million (up 117 per cent y-o-y) which is above its expectations, but within consensus’ expectations, due to better timber performance.
MIDF Amanah Investment Bank Bhd’s research team (MIDF Research) on the other hand, pointed out that Ta Ann’s profit before tax (PBT) of the oil palm segment expanded by more than 100 per cent y-o-y.
“This was primarily attributable to the higher CPO price by 45 per cent y-o-y despite a decline in CPO sales volume by 22 per cent. This segment was also bolstered by the higher average selling price of FFB by 49 per cent.
“Nonetheless, the earnings were capped by lower sales volume for FFB by 21.1 per cent. Going ahead, we posit that the earnings contribution from this segment to continue to be promising, premised on higher CPO price,” it said.
Meanwhile, it noted the top-line of timber segment contracted by 11.7 per cent y-o-y to RM69.4 million in the current quarter compared to RM78.6 million in 1QFY20.
As for the PBT level, it said the timber segment recorded lower figures of RM4.4 million (down 43.6 per cent y-o-y) in 1QFY21 as compared to RM7.7 million in 1QFY21 on the back of lower sales volume of logs and timber products in FY21.
“Moving forward, we expect the group’s additional 130,000ha of certified forests to contribute to higher production in meeting the promising demand recovery in plywood from Japan,” it added.
All in, MIDF Research maintained its ‘buy’ call on the stock. It opined: “We are optimistic on the group’s earnings outlook moving forward, predominantly premised on the favourable CPO price environment and an anticipated steady recovery from its timber segment.
“The profit contribution from the oil palm segment is expected to achieve stellar growth, driven by expected higher ASP and relatively resilient FFB production as well as higher CPO sales volume moving forward.
“In addition, we expect the group’s timber segment to potentially turnaround given an anticipated higher ASP and sales volume of its wood-based products from major importers such as India and Japan on the resumption of major economic activities. This will further drive the earnings momentum of the group.”
Meanwhile, Kenanga Research said the group’s plantation division should see sequential improvement in 2QFY21 from a double-barrelled boost – higher CPO price (2QFY21: up 13 per cent quarter to date) and production recovery.
“While we think its timber division’s profitability could continue, India’s (its largest buyer of export logs at 82 per cent in FY20) Covid-19 situation has to be watched closely. Return of strict lockdowns and surge in freight rates could hamper the outlook,” it added.
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This was primarily attributable to the higher CPO price by 45 per cent y-o-y despite a decline in Ta Ann’s CPO sales volume by 22 per cent.