Ta Ann and Jaya Tiasa to gain from weakening ringgit after Brexit.
KUALA LUMPUR: Affin Hwang Capital Research has raised the target price for Ta Ann Holdings Bhd
to RM6.22 after pegging the plantation business’ 2016 estimate earning per share to a higher price-to-earnings ratio (P/E) of 15 times.
“The share price has appreciated by around 18% in the past one month driven by firm log and crude palm oil prices, a weaker Ringgit and anticipation of the Sarawak state elections.
“We see more upside as the market better appreciates the under-valuation of its plantation business,” Affin said, adding that it has maintained a “buy” call on Ta Ann.
Firm demand for tropical logs and the global log shortage are keeping selling prices high, which together with a stronger US dollar have benefitted timber companies, including Ta Ann, and offset the drop in log exports.
“Firm demand for tropical logs coupled with a global log shortage pushed Ta Ann’s log selling prices higher to US$260-290/m3 in 2015 from US$250-US$260/m3 in 2014. The higher selling prices coupled with the strengthening of the US dollar against the ringgit have benefitted timber companies, including Ta Ann, and offset the drop in log exports due to the tight supply,” Affin said.
Affin said a stronger US dollar would also help to partially offset the impact of lower plywood selling prices due to weak demand. Ta Ann’s Tasmanian operation turned profitable in third quarter 2015 after its veneer processing line was upgraded to include a plywood processing line in first half of 2015.
The research house noted that with 95% of its plantable reserves developed and a young average age of 7.5 years, more areas reaching maturity and prime age was expected to contribute to significant growth in fresh fruit bunches (FFB) yields and production.
Affin expects Ta Ann’s plantation pre-tax profit to surpass timber pre-tax profit in 2016.
“We are keeping our FY15-17 forecasts. Our dividend per share forecast of 20 sen for FY15-17 implies an annual yield of 3.7%, which would be one of the highest among the timber and plantation companies,” Affin said.
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