Ta Ann’s FY14 core net profit was in line with our  expectation,  but below  consensus.  We  maintain  our  BUY  recommendation  with  a MYR4.40 TP (12% upside). We continue to like Ta Ann for its continued strength  in  timber  earnings  which  will  benefit  from  the  weak  MYR,  as well  as  its  growing  palm  oil  plantation  contributions.  Valuations  also remain undemanding at these levels.  
 
In  line.  Ta Ann‟s FY14 core net profit was  in  line  with  our  expectation, but  below  consensus  estimates,  at  99%  and  90%  of  FY14  forecasts, respectively. Ta Ann recorded an exceptional gain of MYR17m in 3Q14 from the final tranche of compensation from the Australian Government. No dividend was declared in 4Q14, given the surprise dividend declared in 3Q14. FY14 net DPS declared to-date is 20 sen, translating into a net payout of 60.4% and a net yield of 5.1%.  

Core  net  profit  soared  81%  YoY  in  FY14.  Ta Ann‟s FY14 core net profit  grew  81%  YoY  on  the  back  of  a  32%  rise  in  revenue.  The  timber division‟s PBT grew 78% YoY in FY14, attributed  to  higher  log  (+19%) and  plywood  (+6%)  sales  volumes,  as  well  as  higher  log  (+9%)  and plywood (+3%) prices. The plantation division‟s FY14 PBT rose 26% YoY,  as  CPO  sales  volumes  rose  59%,  offset  by  a  1%  drop  in  CPO prices.

Forecasts  relatively  unchanged.  After  adjusting  for  FY14  results,  our FY15-16 earnings forecasts are relatively unchanged. We also introduce our  FY17  forecast.  We  highlight  that  every  MYR100/tonne  change  in CPO prices could impact the company‟s net profit by 7-9%  per  annum, while  every  MYR0.10/USD change  in exchange  rate  affects  its  profit by 10-12% per annum. 

Maintain  BUY.  Given  the  continued  strength  in  log  dynamics  (robust demand and improving prices), the smaller losses being recorded at the plywood division, as well as the growing palm oil plantation contribution, we maintain our  BUY recommendation on Ta Ann. Our SOP-based TP is maintained at MYR4.40, comprising a P/E target of 12x  CY15 for the timber division and 16x CY15 for the plantation division.

Financial Exhibits

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