Journey to Wealth
Ta Ann - Sustainable income from plantation logs
News
- Over the weekend, it was reported in Starbiz that Ta Ann is increasing the harvest of its plantation logs to produce hybrid plywood.
- In 2011, Ta Ann started harvesting planted acacia trees from logged-over areas in Bintulu, which was reforested more than a decade ago.
- About 95% of the company's planted forests are cultivated with acacia trees, which take about 15 years to mature.
Comments
- We are overall positive on the news as the log extraction yield of about 150 m3 for plantation logs is at least three times higher than the usual logging production.
- In the longer term, this will provide another source of earnings growth from FY16E onwards for the company as nearly 1,000 ha of its plantation logs mature.
Forecast
- We are maintaining our FY12E-FY13E earnings of RM179m-RM193m. FY16E earnings have been raised by 1% to RM220m as the first significant batch of plantation logs planted in 2001 matures.
- However, plantation logs volume contribution will still be minimal or less than 2% of the group's earnings in FY12E and FY13E based on our estimate.
Rating MAINTAIN OUTPERFORM
- Key earnings growth will still be the plantation segment as we expect Ta Ann's FFB to grow by 30% YoY to 596,000 mt in FY12E.
- In FY11, plantation segment contributed 77% of the group's PBT.
Valuation
- No change to our TP of RM7.75 based on Fwd PER of 13.4x of FY12E EPS of 57.9 sen.
- Our Fwd. PER of 13.4x is based on the 5-year average historical Fwd. PER.
Risks
- A sustained drop in CPO prices.
- Lower than expected FFB growth.
- Lower than expected export logs and plywood prices.
Source: AmeSecurities
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