Analysts upbeat on Ta Ann due to better CPO prices

by **Cals** Tue 25 Feb 2014, 17:20

Business & Markets 2014

Written by Bernama

Tuesday, 25 February 2014 12:34

KUALA LUMPUR (Feb 25): Research houses are optimistic on Ta Ann Holdings Bhd's outlook given that its plantation division will be a direct benefactor of better crude palm oil (CPO) prices, currently above RM2,700 per metric tonne.

Kenanga Research expects the Sarawak-based plantation and timber group's 2014 core net earnings to grow by 74 per cent year-on-year to RM120 million, with its timber division to also be supported by expected better prices for export logs and plywood.

In a note, Kenanga Research said it has maintained its "outperform" rating on the stock with an unchanged target price of RM5.

Meanwhile, in a separate research note, Maybank Investment Bank (IB) Research said Ta Ann’s oil palm estates with a young age profile of 6.5 years would deliver robust fresh fruit bunches (FFB) at a three-year compound annual growth rate of 16 per cent.

"The company's FFB output growth has underperformed its actual growth potential for two continuous years, from 2012 to 2013, due to biological tree rest, however, FFB for 2014 could potentially exceed our 19 per cent year-on-year growth forecast if the trees recover faster than expected," it said.

Ta Ann has been selling 100 per cent of its CPO produced from its palm oil mills to Wilmar’s refinery for many years and it is perceived to be badly affected by the latter's new CPO-sourcing policy, which is to stop buying CPO from oil palm companies that plant trees on forest and peat soil in Sarawak by the end of next year.

Maybank IB Research, however, said Wilmar’s new CPO purchase policy would have minimal impact on Ta Ann’s medium-term prospects as Ta Ann planned to complete its peat soil planting in 2014.