Ta Ann Holdings Bhd
(June 23, RM3.85)
Maintain outperform with a target price of RM4.51: Following the recent completion of the group’s planting of oil palm on its existing peat soil land bank totalling 39,527ha last year, Ta Ann has further expanded its plantation land bank size in Sarawak via a joint venture (JV) with the state government and native customary rights (NCR) owners. The estimated investment for developing the 16,916ha plantable area in Sibu and Kapit is about RM84.5 million. No change to our earnings forecasts.

Under the JV structure, Ta Ann Plantation Sdn Bhd, NCR owners and Pelita Holdings Sdn Bhd (PHSB), a subsidiary of the Sarawak government, will hold 60%, 30% and 10% respectively. About 10,210.2ha and 6,706.8ha will be developed in Sibu and Kapit respectively under the JV. Ta Ann Plantation will develop and manage the plantation land and also source the required funding for its JV partners in this project. PHSB will be responsible for initiating and facilitating in land matters relating to the project.

The estimated initial investment for Ta Ann based on its 60% stake will be about RM50.7 million, which is relatively small given its cash level of RM301 million and net gearing of 0.19 times.

We laud the venture as the group will be able to further expand its fresh fruit bunch production in the future at a minimal investment as the vacant land is contributed by the NCR party. The NCR party will help expedite the plantation development without causing unnecessary issues in the local community. — PublicInvest Research, June 23

This article first appeared in The Edge Financial Daily, on June 24, 2015.