-  We maintain HOLD on Ta Ann Holdings Bhd with a higher fair value of RM4.00/share, based on a 15x PE against an upward revised FY14F core EPS of 26.7 sen.

-  Following the 3QFY13 result, we have revised upwards our FY13F core net profit by 52% to RM53.3mil and FY14F core net profit by 8% to RM99mil, on account of lower CPO costs and narrowing losses at Tasmania.

-  Ta Ann posted a 3QFY13 core net profit of RM32.9mil (+9.9% YoY) vs. a RM2.6mil profit in 2QFY13, bringing the 9MFY13 total earnings to RM39.5mil – in line with the consensus estimate of RM51.5mil but beating our earlier forecast of RM35mil for the full year.

-  It declared an interim dividend of five sen/share, totalling RM18.5mil to be paid on 27 Dec 2013. We continue to expect a final dividend of five sen/share.

-  Its FFB operating cost fell by 27% from RM370/tonne in 1HFY13 to RM270/tonne in 3QFY13, while output rose by 57% QoQ to 169,652 tonnes. For the nine-month period, output rose by 8% to 380,609 tonnes – in line with and representing 71% of our projected tonnage for the full year.

-  The average CPO prices realised stood at RM2,257/tonne in 3QFY13 and at RM2,224/tonnes for 9MFY13 vs. MPOB’s RM2,338/tonne and RM2,323/tonne for the same periods, respectively. We now expect it to be at RM2,305/tonne (vs. RM2,400/tonne previously) for FY13F.

-  Ta Ann’s 3QFY13 result was also boosted by a cutback in Tasmanian veneer production, with plywood making up only 7% of sales vs. 24% in 2QFY13 and 3QFY12. This led to a pre-tax loss of RM1.7mil in 3QFY13 for the division – bringing the 9MFY13 loss to RM21.8mil. We have tweaked the pre-tax loss (before EIs) to ~RM38mil for FY13F from our earlier projected loss of ~RM40mil.

-  In 2QFY13, it booked an exceptional gain of RM62mil (before tax provision of RM9.52mil) from the recognition of compensation from the Australian government. It also made a PPE impairment loss in relation to the Tasmania operations amounting to RM31mil.

-  Plywood ASP came in at US$524/cu m (-4% YoY; -0.8% QoQ) and US$518/cu m (-4% YoY) for 3QFY13 and 9MFY13, respectively. Our FY13F ASP projection is at US509/cu m.

-  Log export ASP was at US$248/cu m (+20% YoY, -3% QoQ) for 3QFY13 and at US$238/cu m for 9MFY13. We maintain our log export ASP at US$228/cu m for FY13F. We understand that the current log and plywood ASPs (October) are at US$209/cu m and US$517/cu m, respectively.

Source: AmeSecurities