Maybank IB Research expects earnings to play seasonal catch up in the second half of 2024 on better fresh fruit bunch output and higher logs production on improved weather.
PETALING JAYA: Ta Ann Holdings Bhd
’s plantation profits should improve but not for timber which may continue reporting losses for another quarter or two, says Kenanga Research.
The research house said costs are likely to stay moderate as fuel and fertiliser expenses have dipped by 10% to 30% year-on-year (y-o-y), while improving palm kernel prices could potentially cushion a pending minimum wage hike.
It adds that improving plantation contribution is expected to be negated to an extent by weak timber performance.
After a poor first quarter, the second quarter financial year 2024 (2Q24) earnings continued to slip quarter-on-quarter (q-o-q) and y-o-y as better earnings from the plantation segment were offset by losses from the timber division.
This led to its downgrade of Ta Ann’s financial year 2024 (FY24) to FY25 core earnings per share (EPS) by 14% and 11%, respectively, and target price (TP) to RM3.60 from RM4.00 a share. It retains its “market perform’’ call for the stock.
MIDF Research is retaining its earnings estimate and maintains its “buy’’ call with a revised target price of RM4.16 a share, as it rolls forward its valuation to FY25 EPS of 49.0 sen while keeping its 8.5 times price earnings ratio (P/E) target, to the historical average mean of almost five years.
It said Ta Ann’s share price is highly connected to crude palm oil (CPO) movement, with a correlation of about 0.82, hence any upward trajectory in CPO prices (dry weather spell) would provide trading opportunity in the stock.
For context, a correlation coefficient of one symbolises a perfectly direct relationship, a coefficient of negative one represents a perfectly inverse association, while a coefficient of zero means the two variables in study are independent of each other.
Maybank IB Research expects earnings to play seasonal catch up in the second half of 2024 (2H24) on better fresh fruit bunch output and higher logs production on improved weather.
Following its EPS revisions, the research outfit tweaked its TP to RM4.03 from RM4.29 a share on an unchanged 10.5 times FY24 P/E.
Meanwhile, CGS International (CGSI) Research also reiterated its “add’’ call with an unchanged TP of RM5.50 a share.
It likes Ta Ann for its strong balance sheet, with a sturdy net cash position of RM1 a share as at end-June 2024, and high FY24 to FY26 dividend yields of 5% to 6%.
CGSI Research pointed out that downside risks to its forecasts for Ta Ann include lower-than-expected CPO and timber products output, mainly due to volatile weather and lower sales volume for the group’s timber products.
The re-rating catalysts include stronger-than-expected CPO price spikes and higher-than expected dividend payouts.
