FY21 Core Net Profit (CNP) of RM286m came in 11% above ours and 30% higher than consensus, on higher palm oil prices. Higher 4Q FFB output also helped though full-year fruit production declined by 3%. Meanwhile, full-year CPO price surged by about 64% YoY and 4Q prices were even stronger. CPO prices are expected to stay higher and longer hence FY22-23 Core EPS are upgraded by 113% and 87% on the back of higher CPO price assumptions of RM4,200 and RM3,500 per MT respectively. We are maintaining Market Perform but upgrading TP from RM3.25 to RM6.00 on blended plantation-cum-timber PER of 10x.

Above expectations. 4QFY21 NP of RM116m came in stronger by 50% QoQ as well as YoY (4Q FY20 registered losses) thanks to bouyant CPO prices, which averaged RM5,130 (+22% QoQ, +65% YoY) while FFB output improved to reach 204k MT (+5% QoQ, +19% YoY). However, full-year fruit production eased by 3% YoY to 691k MT but strong CPO price lifted FY21 CNP by 237% YoY to RM286m. Average CPO price of RM4,339 per MT was 64% stronger than a year ago. The performance of the timber operations improved in 4Q FY21 as well as for the full year mainly on better timber prices. Log volume was up YoY for both 4Q FY21 (+13%) and the full year (+5%) though 3Q FY21 did 10% more volume than in 4Q FY21.

Dividends: TAANN first announced an interim DPS of 10.0 sen in Jul 2021. In Nov 2021, a second interim DPS of 20.0 sen was announced. For 4Q FY21, no final dividend was declared. Instead, an interim for the new financial year (ie FY22) of 5 sen was announced. As such, total FY21 dividend remains 30 sen.

Outlook: International edible oil & fats traders had expected good South America soyabean harvest come early 2022 to ease supply after 2021 ended with only slightly higher inventories compared to a year ago. However, dry weather in Brazil had dashed such hopes with output trimmed by 5-10%. Meanwhile, palm production in Malaysia is still hampered by labour shortfall which leaves 2H 2022 US soyabean harvest and seasonally better palm output to meaningfully ease supply tightness. Therefore, CPO prices are expected to remain elevated and longer than earlier anticipated. CPO prices for TA ANN should now average at RM4,200 per MT for FY22 (up from RM3,200 previously) and RM3,500 for FY23 compared to our old estimate of RM3,000.

Thanks to the strong earning and cashflows, TA Ann ended FY21 with net cash of RM67m compared to net debt RM240m a year ago.

Maintain MP but revising up our TP to RM6.00 based on 10x FY22E PER, reflecting (a) the earnings mix of oil palm plantation and timber (b) flattish earnings over FY22-23 due to higher tax in FY22 followed by lower CPO prices in FY23. Risks to our call include: (i) adverse weather (ii) a sharp rise or fall in CPO prices, and (iii) the volatility in timber prices.

Source: Kenanga Research - 1 Mar 2022