- We maintain BUY on Ta Ann, with an unchanged fair value of RM4.55/share, based on a 16x PE against an FY15F core EPS of 28.4 sen.

- Ta Ann reported a 4QFY14 core net profit of RM20.5mil, bringing the total for the year to RM105.5mil – in line with our and consensus forecasts of RM105mil.

- Management expects FY15F earnings to be similar to FY14’s or slightly lower, given the continuing lacklustre plywood prices. We have tweaked downwards our FY15F earnings by 2%.

- As anticipated, no final dividend was proposed after it had earlier declared interim dividends totalling 20 sen/share. All the operating segments for FY14 performed largely in line with our estimates (see Exhibit 3).

- As expected, the plywood division turned in a core pre-tax loss of RM5.6mil vs. our projected loss of RM5.8mil. This was an 86% improvement from FY13’s loss of ~RM40mil.

- Management had attributed this to the sale of higher premium plywood to the Australia market. It has also reduced the production of veneer in Tasmania pursuant to a cut in supply of logs from Tasmania Forestry.

- Notwithstanding this, we maintain our plywood division loss at RM15mil per annum over the next few years. Management has since guided likewise.

- Included in the plywood PBT of RM11.4mil for FY14 was a RM17mil gain – the 2nd and last tranche compensation from the Australian government pursuant to a wood supply reduction agreement.

- Encouragingly, the logs division has been able to sustain its strong performance due to continued demand from India. We maintain our log export ASP assumption at US$220/cu m for FY15F vs. guidance of ~US$230/cu m.

- Our FFB output assumption is maintained at 680,000 tonnes (yield at 19.2%) vs. management guidance of 650,000 tonnes. We also maintain our FY15F CPO price assumption at RM2,400/tonne.

- Upside risks stemming from the weaker ringgit (in view of timber products being sold in USD) could be mitigated by lower-than-expected CPO prices. Potential downside risks include a downturn in log demand from India.

- Dividend payout for FY15F could be at a similar level to FY14’s 20 sen/share (our assumption: 15 sen/share) due to a low capex in view of no new plantings ahead.

Source: AmeSecurities