Affin Hwang maintains buy on Ta Ann, lowers TP

KUALA LUMPUR: Ta Ann Holdings Bhd posted net profit, excluding one-off items, of RM73mil in the first half ending June 30, 2017, which was 74.4% higher from the previous corresponding period.

Affin Hwang Capital Research says this was 55.7% and 58.5% of its and market expectations, respectively.

Revenue dropped by 12.8% quarter-on-quarter to RM266.4mil, owing to the respective revenue declines at the timber and plantation divisions. 

Factors negatively impacting revenues included drops in log and plywood sales volume and a lower crude palm oil (CPO) average selling price (ASP). Mitigating factors to this decline included increases in the log and plywood ASPs and higher CPO production.

However, the research house is cutting 2017-19 earnings per share forecasts by 5% to 25%, mainly to take into account the recent cut in export quota to 20% from 30% previously, lower log production and higher cost of production assumptions for the timber division. This is partially mitigated by an increase in the log ASP assumption by 8% year-on-year to US$280 per cubic metre in FY17-19E.

"We believe it will be a challenging environment going forward for the timber division given the increase in hill timber premium as well as the reduction in export quota. Nevertheless, we believe that the likely increase in plantation division earnings would be able to offset the drop in timber division earnings," said Affin HWang Research.

THe research house is maintaining is "buy" call with a lower target price of RM4.25.