Journey to Wealth
Tan Ann Holdings - 2QFY12 expected to disappoint
- We maintain BUY on Ta Ann Holdings Bhd, but with a lower fair value of RM5.20/share (vs. RM5.60/share previously), based on a PE of 13x against a further downward revised FY13F EPS of 40 sen (vs. 43 sen previously).
- We expect Ta Ann's results to disappoint in the 1HFY12 numbers, on the back of higher-than-expected losses for its plywood division and lower-than-expected CPO prices.
- As such, we have lowered our FY12F and FY13F earnings by 21% and 7% to RM95mil (-39% YoY) and RM149mil (+57% YoY), respectively, mainly to account for potentially higher losses at its plywood division.
- The plywood division incurred a pre-tax loss of about RM6mil in 1QFY12, which is expected to widen on the back of a significant decline in ASP ' hovering at above US$500/cu m in recent times but below the US$563/cu m achieved in the first quarter. Our plywood ASP assumption is at around US$530/cu m (-16% YoY) for each of FY12F-FY14F, and the export ASP for logs is at about US$208/cu m (-19% YoY).
- We have slashed our plywood sales volume assumption for FY12F by 16% to 170,000 cu m (-19% YoY) from 203,000 cu m previously, and by 25% and 35% for FY13F and FY14F, respectively, to 150,000 cu m and 160,000 cu m.
- Accordingly, we now expect the division to incur a higher pre-tax loss at RM26mil for each of FY12F-FY14F vs. our earlier loss forecasts of RM17mil, RM18mil and RM19mil, respectively.
- Lacklustre demand for wood products due to the slow reconstruction efforts in Japan has contributed to low prices, while a flat economy there has also affected the building industry.
- We have also lowered our CPO price assumption to RM3,200/tonne from RM3,400/tonne previously for FY12F, and to RM3,300/tonne for FY13F. However, we raise our FFB volume assumptions by 6%-10% for each of FY12FFY14F to 500,000 tonnes (+9% YoY), 629,457 tonnes (+26% YoY) and 758,085 tonnes (+20% YoY), respectively.
- We have also cut our gross dividend forecast to 15 sen/share for FY12F-FY14F, from 20 sen/share previously (vs. 20 sen/share for FY11).
Source: AmeSecurities
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
