Excluding i) PPE written off (RM0.3m), ii) realized FX gain (RM3.7m) and minority interests, Ta Ann's 9MFY24 core profit increased marginally by 1.4% YoY to RM130.1m. The results were below our and the consensus full-year expectations, making up only 64% and 69%, respectively. Nevertheless, we expect a strong catch-up in the final quarter on the back of stronger CPO prices. Retain Outperform call with an unchanged SOP-based TP of RM5.17. A second DPS of 20sen was declared for the quarter, bringing the cumulative DPS to 35sen (vs 9MFY23: 25sen).

• 3QFY24 sales declined 4.4%. Sales slipped 4.4% YoY to RM467.6m, dragged by a slump in timber sales despite stronger palm oil sales recorded. Timber sales tumbled 45% YoY to RM51.2m as log sales fell 49% YoY to RM14.7m while plywood sales dipped 42.3% YoY to RM37m. 3QFY24 average log export price fell 5.7% YoY to USD213/cu m while plywood price dropped from USD548/cu m to USD505/cu m. Log and plywood export volumes tumbled 43% YoY each to 39,531 cu m and 41,683 cu m, respectively. On the other hand, palm oil sales rose 5% YoY to RM416.1m. 3QFY24 average CPO price rose from RM3,695/mt to RM3,980/mt (9MFY24: RM3,978/mt vs 3QF23: RM3,761/mt) while 3QFY24 FFB production climbed 2.7% YoY to 216,462mt (9MFY24: 492,690mt, +2.4% YoY). 3QFY24 OER fell from 19.95% to 19.21% due to lower third-party FFB.
• 3QFY24 core profit climbed 6.5% YoY. Core profit grew from RM59.6m to RM63.5m, led by stronger palm oil earnings, partially offset by timber losses. The timber segment reported a second straight quarterly loss of RM3.4m, as plywood suffered a loss of RM4.4m, dragged by increased overhead costs (additional of RM1m per mth) in Tasmania. Plantation earnings rose 14.4% YoY to RM108.3m. 9MFY24 CPO production cost averaged at RM1,950/mt (PK-credit: RM300/mt) while plywood production cost was more than USD505 cu m. Meanwhile, earnings contributions from Sarawak Plantation and JV-owned refinery rose 56.3% YoY to RM11.5m.
• Outlook. Due to the weaker-than-expected production growth in the first nine months, management has lowered its FFB production target from 720k to 690k mt. Both Muriate of Potash and compound had retreated from RM1,600/mt in early-2024 to RM1,200/mt. It also guided that the production has peaked in Sept and is expected to decline by 5% QoQ in 4Q. It had replanted about 2,000ha in the first nine months and is on track to achieve its full-year target of 2,500ha. There is a small new planting area of 200ha, which was in collaboration with the state entity. Fertiliser application had achieved 95% completion. Due to the adverse weather in the first half, log production was affected by logistics issues. It had also reduced its log and plywood targets to 200,000 cu m and 55,000-60,000 cu m, respectively. Based on our sensitivity analysis, its PAT will change by RM12m for every RM100/mt movement in CPO price.

Source: PublicInvest Research - 26 Nov 2024