- We maintain HOLD for Ta Ann Holdings, with an unchanged fair value of RM3.98/share, based on a PE of 14x FY15F EPS.

- Ta Ann yesterday announced new partnerships with state-owned Pelita Holdings to develop oil palm estates at two Native Customary Rights (NCR) land parcels in Sarawak, with the proposed participation of NCR land owners.

- The latest deals stem from the failure to progress with previous agreements that were signed in 2012 involving the proposed development of three other NCR land parcels due to the lack of interest shown by those NCR land owners. The earlier agreements had been revoked.

- The latest agreements involve a gross area of 17,017ha, of which 10,210.2ha is plantable, in Kanowit (Sibu division), and another measuring 11,178ha, of which 6,706.8ha is plantable, in Kapit (at the confluence of Batang Rajang and Batang Baleh).

- Ta Ann will hold 60% of each of the two JV companies, while Pelita holds the balance, including 30% in trust for the NCR landowners. Ta Ann expects the eventual paid-up capital of the JVs to amount to RM51mil and RM33.5mil for the Kanowit and Kapit JVs, respectively.

- With the latest JVs, Ta Ann’s gross oil palm hectarage and plantable areas will increase by over 40% and 30%, respectively. Its existing plantable areas of ~50,000ha are expected to be fully developed by end-FY15.

- We believe the details have yet to be worked out with the NCR landowners. We keep our numbers; if the proposals come through, contributions are a few years down the road. We maintain our forecasts and our HOLD call.

Source: AmeSecurities Research - 23 Jun 2015