This article first appeared in The Edge Financial Daily on March 27, 2018
Ta Ann Holdings Bhd
(March 26, RM3.01)
Maintain outperform with an unchanged target price of RM4.14: The Sarawak forest department has raised the fee for tracking the movement of planted forest timber by 300% to RM1.50 per cubic metre (cu m) from 50 sen per cu m effective early this month. In addition, the department also introduced a transportation fee of RM1 per cu m for hardwood timber harvested from natural forests from March 1. It is understood that the new fee is to pay for tracking the movement of logs through the issuance of a shipping pass or land transport pass.
Based on our channel checks, about 226,000 cu m or 60% of Ta Ann Holdings Bhd’s log production are derived from the natural logs this year. This year, we expect to see a staggering jump of more than 200% in the planted forest timber production. In short, based on our estimates, the log fee hike together with the introduction of a transportation fee for hardwood timber harvested from natural forests, could lead to an earnings impact of -0.3% to -0.5%. Hence, we made no change to our earnings forecasts.
Thanks to the strong efforts in the planted forest or reforestation projects over the next few years, the group should see increasing planted forest timber production. As of financial year 2016, the group planted trees’ harvestable area covers 16,413ha or 47% of total planted area of 35,247ha with an average age profile of at least 10 years old. The company has embarked on the second rotation planting following the harvesting of the first-round planted acacia. It has also carried out kelampayan species planting along its oil palm estates. — PublicInvest Research, March 26