Stock picks for 2016: Ta Ann Holdings

by **Cals** Mon 04 Jan 2016, 23:21

Stock picks for 2016: Ta Ann Holdings

By Tan Siew Mung / The Edge Financial Daily | January 4, 2016 : 10:06 AM MYT

This article first appeared in The Edge Financial Daily, on January 4, 2016.

[size=16]Ta Ann Holdings Bhd ([You must be registered and logged in to see this image.] Valuation: 2.00, Fundamental: 2.30)

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Ta Ann Holdings Bhd, with its attractive dividend yield, high-growth businesses and undemanding valuation, makes it a top pick in 2016 for analysts.

UOB Asset Management (Malaysia) Bhd ([You must be registered and logged in to see this image.] Valuation: 1.80, Fundamental: 1.00) executive director and chief executive office Lim Suet Ling likes the Sarawak-based plantation and timber group Ta Ann because of its strong potential for growth coming from its plantation division and undemanding valuation.

Supported by the recent stabilised crude palm oil (CPO) prices, Lim believes that this would deem Ta Ann attractive for foreign funds looking for stocks that provide strong plantation exposure.

Kenanga Research plantation analyst Voon Yee Ping remains bullish on the stock into the new year due to Ta Ann’s dividend yield and high-growth businesses.

According to Voon, Ta Ann’s dividend yield of 5.9% is well above the sector’s average of 2.6%, while its price-to-earnings ratio stands at 14 times versus the peer average of 21 times.

“Ta Ann is still our ‘outperform’ top pick [for 2016],” she said.

The group on Nov 16, 2015 declared a second interim dividend of 10 sen per share for the financial year ended Dec 31, 2015 (FY15), bringing its total dividend for the year to 20 sen per share.

Most analysts noted that stronger earnings could potentially yield higher dividends for the group.

Ta Ann saw its net profit jump 54.63% year-on-year to RM67.42 million in the third quarter ended Sept 30, 2015 (3QFY15). For the cumulative nine-month period last year, it achieved a 25.4% year-on-year increase in net profit to RM127.95 million. The positive results prompted all analysts to upgrade their earnings forecast for Ta Ann in the next two years.

Voon also pointed to the regional timber supply crunch, which should provide near-term earnings upside for the group’s timber division.

“Moreover, the downside on plantation is limited as CPO prices are expected to improve in 2016,” she added.

Another plus point for Ta Ann is that it is seen as a beneficiary from a weaker ringgit this year.

In the past year, Ta Ann shares appreciated by 29.38% to close at RM5.02 last Thursday, with a market capitalisation of RM1.86 billion.
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