-  We maintain HOLD on Ta Ann with an unchanged fair value of RM4.27/share based on a PE of 16x FY14F core EPS of 26.7 sen. 

-  Ta Ann posted a 2QFY14 core net profit of RM29.7mil (+959% YoY, +2% QoQ) – bringing the 1HFY14 total to RM58.7 mil (+758% YoY). This represents 59% and 55% of our and consensus forecasts, respectively.

-  While the 1H outperforms, we expect the 2HFY14 results to ease in view of the softening of CPO prices. No dividend was declared (1HFY13: Nil), apart from the 10 sen/share already paid out for 1QFY14.

-  The plywood division’s positive performance was sustained, recording a PBT of RM4.5mil in 2QFY14 (10% QoQ; vs. -RM12.7mil in 2QFY13). Recall the plywood division posted its first quarterly core pre-tax profit in three years, at RM4.1mil in 1QFY14.

-  However, Tasmanian plywood’s loss widened to an estimated -RM3.3mil in 2QFY14 from –RM1.3mil in the previous quarter. For 1HFY14, plywood ASP improved by 4% YoY to USD538/cu m.

-  For now, we maintain our net loss estimate for the plywood division at ~RM11mil, after factoring in an estimate gain of ~RM17mil from the 2nd tranche of the compensation from the Australian government, which is due in 2H14.

-  The log division continued to be strong in 2QFY14, with PBT at RM21mil (+59% YoY; -11% QoQ) and more than doubling to RM44mil for 1HFY14 from a year earlier. Export ASP was sustained at US$251/cu m, while sales volume rose 37% on continued demand from India.

-  The 1HFY14 FFB output rose 10% YoY to 232,222 tonnes, representing only 37% of our estimate (FY14F yield: 20.2%). CPO volume rose 46% YoY to 53,000 tonnes – representing 52% of our estimate, largely due to higher external purchases of FFB.

-  CPO average selling price in 1HFY14 was at RM2,510/tonne (+14% YoY), ~2% above our estimate of RM2,450/tonne. However, the bottomline was affected by the lower FFB output, with PBT at RM25mil (accounting for only 21% of our estimate).

-  We maintain our numbers and Hold call. The oil palm division’s underperformance is mitigated by the stronger-than-expected contributions from the log division.

Source: AmeSecurities