Thumbs up for Ta Ann's bonus issue plan

POSITIVE RESPONSE: Investors chase stock in wake of one-for-five bonus issue proposal


SHARES of Ta Ann rose as much as 2.8 per cent yesterday after the mid-sized plantation company proposed a bonus issue, its fourth issue since 2006, which improved sentiment towards the stock.

Analysts said the one-for-five issue involving up to 61.8 million new shares is unlikely to have any impact on the company's earnings or fundamentals, but creates positive sentiment for its share price, particularly for retail shareholders.

"(It) enables shareholders to have greater equity participation in riding on Ta Ann's growth prospects as well as enhancing its liquidity," Maybank Investment Bank (MIB) Research said in a note to clients yesterday.

Ta Ann, which has some 31,000ha of oil palm estates in Sarawak, was its top pick among plantation stocks.

It was deemed by the research house to have one of the highest earnings growth prospects, with a yearly double-digit growth phase in fresh fruit bunch expected to last till 2017.

MIB, which expects Ta Ann to have a compounded annual growth rate of 15 per cent in net profit over three years, keeps its "buy" call and RM9.00 target price on the shares.

It said the stock will continue to re-rate, pointing out that Ta Ann's business model had evolved significantly from "the days of being a boring and cyclical timber player" into a more defensive oil palm plantation player with growth.

"In 2011, 77 per cent of Ta Ann's profit before tax was derived from its oil palm division. Yet, it trades at an unjustified two-to-four PE (price-to-earning) multiples lower than similar-sized plantation peers and industry leaders in Malaysia," it noted.

The stock last closed six sen, or 0.9 per cent, higher to RM6.56, off an intra-day high of RM6.74.

RHB Research said it was maintaining its target price of RM7.45, which is a 10 per cent discount to its sum-of-parts fair value, to reflect the company's low trading liquidity, given that the bonus issue has not been completed yet.

The bonus issue is expected to be completed in the second quarter of this year.