On track for a robust 1H22F
? 1Q22 core EPS a beat owing to higher CPO and timber product prices.
? We forecast higher qoq 2Q22F earnings amid increased CPO and plywood
prices, on top of seasonally stronger FFB output.
? We raise our SOP-based TP to RM5.45 but maintain our Hold call as we
believe its positive earnings prospects are mostly priced in.
1Q22 core net profit a beat; both divisions ahead of expectations
Ta Ann’s 1Q22 core net profit of RM75m (excluding impairments, gains on disposal of PPE
and quoted investments and fv gains in biological assets) grew by 2.6x yoy, due to stronger
contributions from both its plantation and timber divisions. 1Q22 core net profit of RM75m
made up 29% of our and 25% of Bloomberg consensus forecasts, above our expectations
mainly due to higher-than-expected CPO and timber product prices. To our surprise, the
group declared a second interim dividend of 10 sen (1Q21: nil), bringing total dividends to
15 sen so far, against our previous forecast of 25 sen (revised forecast now at 34 sen).
Higher CPO prices offset the weaker FFB output
1Q22 plantation PBT (excluding fv gains) jumped 2.1x yoy mainly due to higher ASPs for
palm products. 1Q22 average CPO selling prices rose 48% yoy to RM5,550 per tonne,
which more than offset the 3% yoy drop in FFB output. On a qoq basis, however, plantation
PBT fell by 48% as the 10% qoq rise in CPO prices was not sufficient to offset the
seasonally weaker FFB production (-35% qoq). Ta Ann also booked RM17m profit from
associates in 1Q22 from its 30.4% stake in Sarawak Plantation (SPB) on the back of higher
CPO prices (+56% yoy) as well as RM18m biological assets fair value gain. We forecast
its plantation division to record stronger qoq profits for 2Q22F on the back of seasonally
greater FFB production, coupled with potentially higher CPO prices.
Timber division boosted by higher timber product ASPs
1Q22 timber division PBT leapt 5x yoy to RM22.3m, owing mainly to higher plywood and
log prices, partially offset by weaker sales volumes from both segments. We believe its
export log volumes were impacted by production disruptions due to wet weather and freight
delivery delays to India. For its plywood division, we believe Ta Ann benefited from rising
plywood prices in Japan owing to i) a supply crunch for wood products in Japan, and ii)
higher demand for Asian wood products following Russia’s ban on the export of wood
products on 11 Mar 2022. We reckon that Ta Ann should continue to achieve higher
plywood prices owing to the Russian ban, which should drive stronger qoq timber division
profits for 2Q22F, though this could be partially offset by higher raw material prices.
Reiterate Hold as positives mostly priced in
We raise our FY22-23F core EPS forecasts mainly to reflect higher CPO and timber
product price assumptions, though this is partially offset by our assumptions of higher input
and labour costs for both divisions. We raise our TP to RM5.45 as we now value its
plantation division at a higher RM35k/ha to reflect the increase in CPO prices. We retain
our Hold call as we think its positive earnings prospects are mostly priced in.