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Ta Ann - 2HFY12 could still make up for disappointing 1H

kiasutrader
Publish date: Wed, 22 Aug 2012, 10:20 AM
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-  We maintain BUY on Ta Ann Holdings, with a fair value of RM5.20/share, based on a PE of 13x FY13F EPS of 40 sen.

-  1HFY12 numbers disappointed, with net profit of RM25mil (-68% YoY) accounting for only 26% and 20% of our fullyear and consensus forecasts, respectively. This was mainly due to higher plywood losses and a higher effective tax rate (+7ppts to 34.3%). No interim dividend was declared.

-  Regardless, we believe the company could still make up for the shortfall, on the back of a much-better FFB production numbers and efforts to mitigate the losses at the plywood division in 2HFY12.

-  We had earlier lowered our FY12F and FY13F earnings by 21% and 7% to RM95mil (-39% YoY) and RM150mil (+57% YoY), respectively, mainly to account for the expected higher plywood losses. The division's pre-tax loss widened to RM10.9mil in 2QFY12, bringing the total to RM16.7mil for 1HFY12.

-  Management has guided that the company targeted to minimise losses at its Tasmania outfit by cutting down on production, while focusing on its profitable local manufacturing operations in Sarawak. 

-  The company has revised its original target of producing and selling 180,000 cu m of plywood to 150,000 cu m for FY13. Plywood made from Tasmania veneer may only account for roughly 35% of total production from 2HFY12 onwards, as part of its rationalisation plan.

-  We had earlier slashed our plywood sales volume assumption for FY12F by 16% to 170,000 cu m from 203,000 cu m previously and by 25% and 35% for FY13F- FY14F, respectively, to 150,000 cu m and 160,000 cu m. 

-  We had also raised the division's annual pre-tax losses to RM26mil each for FY12F-FY14F vs. earlier loss forecasts of RM17mil, RM18mil and RM19mil, respectively (-RM18mil in FY11).

-  At its oil palm division, CPO sales volume in 1HFY12 totalled 30,067 tonnes (-9% YoY), which made up only 35% of our projected 85,000 tonnes for FY12F. FFB production at 189,347 tonnes (+2% YoY) is largely in line with our expectations, accounting for 40% of our full-year assumption.

-  We had earlier also raised our FFB volume assumptions by 6%-10% for each of FY12F-FY14F to 500,000 tonnes, 629,457 tonnes and 758,085 tonnes, respectively. We expect production to improve in 2HFY12, with an upside bias still to our current forecast.

Source: AmeSecurities
TAANN (5012)
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