Ta Ann’s 9MFY22 core earnings surged 60% YoY to RM279m, bolstered by stronger earnings contributions from both plantation and timber segments. The strong results were in line with our full-year expectation, making up 73% but it exceeded the street expectation, accounting for 86%. Maintain Outperform with an unchanged SOP-based TP of RM5.16. A 4th DPS of 10sen was declared for the quarter.

• Driven by both plantations and timber. The stronger sales of RM595m were mainly led by an increase in both timber (YoY: +24%) and plantation (YoY: +22%) sales. The stronger plantation sales of RM494m were led by an increase in both CPO prices and FFB production. 3QFY22 average CPO selling price advanced from RM4,222/mt to RM4,500/mt, up 6.6% YoY while 3QFY22 FFB production rose 11% YoY to 210,341mt. OER rose slipped from, 19.88% to 19.24%. Meanwhile, timber sales rose to RM100m as sales from log exports and plywood increased by 85% YoY and 5% YoY, respectively. 3QFY22 average log export price rose 4% YoY to USD269/cu m and plywood price jumped 21% YoY to USD721/cu m. 3QFY22 Log export sales volume surged 62% YoY to 23,399 cu m while plywood exports sales volume fell 27% % YoY to 16,801 cu m.

• Core earnings rose 18% YoY to RM94m. The stronger earnings were mainly led by a stronger earnings contribution from both timber and plantation segments. Plantation pre-tax earnings climbed 14% YoY to RM134m. 3QFY22 CPO production cost averaged at RM1,600/mt (inclusive of RM250/mt for PK credit). Timber earnings surged 4x to RM26m, as plywood earnings doubled to RM13m while log earnings jumped 3x to RM13m. Meanwhile, earnings contributions from its 31%- owned Sarawak Plantation and joint-venture owned refinery company tumbled 43% YoY to RM8m.

• Eyeing strong FFB production growth. Management thinks that FFB production has peaked in Oct and is on track to reach 420k mt for FY22. Management is targeting a strong FFB production growth of 34% for next year. Current worker shortage stands at 300 pax or 10% of workforce. Management sees higher production cost at RM2,100/mt (inclusive of RM220-250/mt for PK credit) in 2023. Fertilizer application reaches 75% of the 9-month target. For FY23, management plans to replant 2k ha on peat land and another 500ha on mineral land. There will be an additional mature area of 2.4k ha and about 2k ha remains plantable. On the timber segment, it is targeting log exports of 100k cu m and plywood sales of 115k cu m. Based on the sensitivity analysis, its PAT will fluctuate by RM11m for every RM100/mt change in CPO price movement. Management has set 2023 CPO price assumption of 4,100/mt, USD270/ cu m for log price and lower plywood price of USD650/ cu m. Lastly, management has allocated capex of RM70m with RM38m for plantation development (oil palm and timber reforestation) and remaining RM28m for upkeep and maintenance.

Source: PublicInvest Research - 30 Nov 2022