Ta Ann’s 9MFY13 core net profit came in above our estimates, at 86% of FY13  forecast.  We continue to  see  value in Ta Ann, on the back of: i) gradually improving prospects for  the timber industry  amid  increasing economic  activities  in  Japan  and  rising  timber  prices,  ii)  a  continued rise in  FFB production,  and iii)  a rising  CPO  price trend. Maintain BUY,with a higher MYR4.53 FV (from MYR4.18).

• Above  expectations.  Ta  Ann‟s  9MFY13  core  net  profit  of  MYR39.6m came  in  above  our  estimates,  but  in  line  with  consensus,  at  86%  and 73%  of  the  respective  FY13  forecasts.  The  main  variance  was  due  to smaller  volume  of  the  higher  cost-bearing  Tasmanian  logs  processed and  sold  in  3Q13  (-81%  q-o-q  and  -78%  y-o-y),  as  the  company completed its inventory clearing in the previous quarter, which resulted in its plywood unit incurring  smaller  pretax  losses of MYR1.7m in  3Q13 (-87% q-o-q and -81%  y-o-y). Ta Ann declared an interim DPS of 5 sen in 3QFY13.
• 9MFY13  core  net  profit  fell  29%  y-o-y  on  the  back  of  a  3%  dip  in revenue. Revenue in the timber division fell due to lower log volume and lower plywood prices, offset by higher log prices and plywood volume.
• Meanwhile, PBT margins improved to 13.4% (from 0.3% in 9MFY12) due to  higher  profits  in  the  log  division  and  lower  losses  in  the  plywood division. The plantation division‟s  9MFY13  PBT dived 45% as prices fell 29%, although production volume rose by 8%.
• Forecasts  raised.  We raise  our earnings forecasts by  35.9% for FY13 and  9.2% for FY14, after  incorporating  lower  volume  of Tasmanian logs and lower costs in its plantation division.
• Maintain BUY.  We maintain our BUY recommendation on Ta Ann.  We continue to see value in Ta Ann,  on the back of: i) gradually improving prospects for the timber industry amid increasing economic activities in Japan and rising timber prices, ii)  a continued rise in fresh fruit bunches(FFB) production, and iii) a rising crude palm oil (CPO) price trend. Postearnings revision, we lift our SOP-based FV (16x FY14 for the plantation unit and 12x FY14 for the timber division) to MYR4.53 (from MYR4.18).

Financial Exhibits

SWOT Analysis

Company Profile
Ta Ann is mainly involved in the manufacture and sale of plywood, trading of timber logs and cultivation of oil palms.

Recommendation Chart

Source: RHB