Higher earnings expected for Ta Ann over next two years

KUALA LUMPUR: Ta Ann Holdings Bhd's future earnings are expected to grow due to higher contributions from both its plantation and timber divisions, says Affin Hwang Capital research.

The research house said log production as well as export log sales volume is expected to be higher in 2019-2020E due to Ta Ann's new crtificate for forest management for its subsidiary Tanjong Manis Holdings Sdn Bhd.

The certificate allows the company to increase its log export quota to 40% couple with more forest lands to be certified by 2019-2020.

"The global shortage for logs and firm demand for its timber products (both log and plywood) should also help to keep prices high," it added.

In the palm oil division, Affin Hwang expects 2019-2020E earnings growth due to rising CPO production and better prices, partially offset by higher production costs from an incease in the minimum wage.

"The current low CPO price, in our opinion, is unlikely to be sustained in 1Q19, when we expect
seasonal production declines and world palm-oil consumption will be in excess of production, thus reducing stocks. 

"We think CPO prices could potentially improve in 2019E and onwards to RM2,400," it said.

The research house maintained its buy call on the counter with an unchanged target price of RM2.80.