This article first appeared in The Edge Financial Daily on November 30, 2017

Ta Ann Holdings Bhd
(Nov 29, RM3.62)
Maintain buy with an unchanged target price of RM4.50: Ta Ann Holdings Bhd’s nine months of financial year 2017 (9MFY17) core net income (CNI) of RM92.7 million is within expectations as it made up 77% and 72% of ours and consensus full-year FY17 earnings estimates, respectively. As expected, no dividend was announced.

The plantation division’s profit before tax (PBT) improved 99% year-on-year (y-o-y) to RM153.4 million as it benefited from better crude palm oil price (+14% y-o-y to RM2,723 per tonne) and higher fresh fruit bunch (FFB) production (+15% y-o-y to 565,614 tonnes). The plantation division is the biggest earnings contributor with PBT of RM153.4 million (93% of the group’s).

The timber division’s PBT was down 81% y-o-y to RM11.2 million and the timber division registered loss before tax of RM5.3 million in the third quarter (3QFY17). We gather that this is caused by the delay in shipment of the products in the plywood division. Hence, we expect things to normalise in 4QFY17 and the division should return to a profitable position. The PBT contribution from the timber division remains small at RM11.2 million (7% of the group).

We like the stock as its plantation division earnings growth should remain strong . — MIDF Research, Nov 29