TAANN (5012) - Ta Ann - Dividend yield remains decent
Target RM3.85 (Stock Rating: HOLD)
Ta Ann’s FY14 core net profit was largely in line at 102% of our forecast and 103% of consensus. Despite the outperformance, we are slightly disappointed that no dividend was declared in the quarter. As such, its YTD DPS of 20 sen is 13% shy of our full-year estimate. We maintain our earnings forecasts, SOP-based target price and Hold recommendation on the stock. For exposure to the plantations sector, we prefer First Resources.
Key highlights
Ta Ann’s reported net profit in 4Q14 fell by 35% yoy. This was due to a negative tax rate in 4Q13 which distorted the comparison. At the pretax profit (PBT) level, 4Q14 PBT rose by 27% yoy to RM29m. Earnings were lifted mainly by a turnaround in its timber division, which recorded a PBT of RM12m this quarter against a pretax loss of RM10m last year. We understand that these earnings were contributed almost entirely by its logging operation. Logging earnings were significantly better due to higher log selling prices (+21%) and sales volume (+11%). However, its plywood operation continued to be loss-making as a result of weak plywood prices. Ta Ann also achieved lower CPO selling prices of RM2,105 per tonne in 4Q14, 11% lower than that in 4Q13. This dragged its plantation PBT lower by 26% to RM18m.
We expect lower profit in FY15
We are projecting a 4% decline in Ta Ann’s core net profit in FY15 as a result of lower log production. The 26% rise in its log production in FY14 was due in part to favourable weather in its concession areas. Our forecast is more conservative as we expect the weather to normalise, affecting its logging operations. We project an 8% decline in its log production this year. Every 1% decline in log production could increase our FY15 EPS by 0.8%.
Share price supported by a decent dividend yield
The group did not declare a dividend in 4Q. As such, DPS for FY14 amounted to 20 sen, or a 60% payout ratio for the full year. At a 60% payout, our earnings estimate suggests a dividend yield of 4.3% - one of the highest among the Malaysian planters. This is likely to support its share price in the near term.
Source: CIMB Daybreak - 26 February 2015
Target RM3.85 (Stock Rating: HOLD)
Ta Ann’s FY14 core net profit was largely in line at 102% of our forecast and 103% of consensus. Despite the outperformance, we are slightly disappointed that no dividend was declared in the quarter. As such, its YTD DPS of 20 sen is 13% shy of our full-year estimate. We maintain our earnings forecasts, SOP-based target price and Hold recommendation on the stock. For exposure to the plantations sector, we prefer First Resources.
Key highlights
Ta Ann’s reported net profit in 4Q14 fell by 35% yoy. This was due to a negative tax rate in 4Q13 which distorted the comparison. At the pretax profit (PBT) level, 4Q14 PBT rose by 27% yoy to RM29m. Earnings were lifted mainly by a turnaround in its timber division, which recorded a PBT of RM12m this quarter against a pretax loss of RM10m last year. We understand that these earnings were contributed almost entirely by its logging operation. Logging earnings were significantly better due to higher log selling prices (+21%) and sales volume (+11%). However, its plywood operation continued to be loss-making as a result of weak plywood prices. Ta Ann also achieved lower CPO selling prices of RM2,105 per tonne in 4Q14, 11% lower than that in 4Q13. This dragged its plantation PBT lower by 26% to RM18m.
We expect lower profit in FY15
We are projecting a 4% decline in Ta Ann’s core net profit in FY15 as a result of lower log production. The 26% rise in its log production in FY14 was due in part to favourable weather in its concession areas. Our forecast is more conservative as we expect the weather to normalise, affecting its logging operations. We project an 8% decline in its log production this year. Every 1% decline in log production could increase our FY15 EPS by 0.8%.
Share price supported by a decent dividend yield
The group did not declare a dividend in 4Q. As such, DPS for FY14 amounted to 20 sen, or a 60% payout ratio for the full year. At a 60% payout, our earnings estimate suggests a dividend yield of 4.3% - one of the highest among the Malaysian planters. This is likely to support its share price in the near term.
Source: CIMB Daybreak - 26 February 2015
