$TAANN / 5012 (TA ANN HOLDINGS BERHAD) $INNO / 6262 (INNOPRISE PLANTATIONS BERHAD) $SOP / 5126 (SARAWAK OIL PALMS BERHAD) $SWKPLNT / 5135 (SARAWAK PLANTATION BERHAD) all quite power qr and power dividend
other plantation can ikut ??
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by Kenanga
MARKET PERFORM – TP RM3.60
"Timber Headwinds To Drag Earnings”
TAANN’s 1HFY24 results were disappointing. After a poor 1Q, 2QFY24 earnings continued to slip QoQ and YoY as better earnings from plantation segment were offset by losses from the timber division. Operations in the former should continue to fare well moving into 2H but the latter will likely to still face headwinds. We downgrade FY24-25 core EPS by 14% and 11%, respectively, and TP to RM3.60 (from RM4.00). MARKET PERFORM call is kept.
Analyst:
Khoo Teng Chuan
khootc@kenanga.com.my
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by Public
Outperform – TP RM4.88
"Dragged by Losses in Timber Business”
Excluding i) PPE written off (RM0.2m), ii) realized FX gain (RM2.5m) and MI (RM19.4m), the group saw a flattish growth in its 1HFY24 core profit at RM80.5m. However, the results were below our and the consensus full-year expectations, making up only 37% and 41%, respectively. We cut our FY24- 26F earnings forecast by 5%-9% to reflect struggling timber business. Maintain Outperform call with a lower SOP-based TP of RM4.88. No dividend was declared for the quarter.
Analyst:
Chong Hoe Leong
chonghoeleong@publicinvestbank.com.my
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by Maybank
BUY – TP RM 4.03
"2Q earnings hurt by low logs output due to wet weather”
2Q core PATMI missed our/consensus estimates mainly due to wet weather that impacted logs output and exports. We expect earnings to play seasonal catch up in 2H24 on better FFB output and higher logs production on improved weather. Following our EPS revisions, we tweak our TP to MYR4.03 (from MYR4.29) on unchanged on 10.5x FY24E PER, its 5Y mean. BUY for TAH’s attractive net DY of 6% (based on 60% DPR), single-digit forward PER, and net cash of MYR296m (ie. 17% of its market cap)
Analyst:
Ong Chee Ting, CA
ct.ong@maybank-ib.com
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by RHB
Neutral – TP RM 3.60
"Dragged By Timber Segment”
Maintain NEUTRAL, new MYR3.60 TP from MYR3.65, 6% downside. We still expect Ta Ann to see better earnings prospects in 2H24, on improved plantation productivity and moderating plantation unit costs. However, its valuation remains fair – the stock is trading at 9.3x FY25F P/E, which is at the high end of its peer range of 6-10x. However, we believe its share price movement will be supported by a handsome c.7% FY24F dividend yield. The plantation unit remains the key driver, accounting for 100% of PBT.
Analyst:
Hoe Lee Leng
hoe.lee.leng@rhbgroup.com
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by CGS
ADD – TP RM5.50
"Timber losses offset by stronger oil palm”
■ 1H24 core net profit at 33% of our/Bloomberg consensus’ full-year forecasts, dragged by timber division losses, offset by stronger oil palm performance.
■ We expect better 2H24F earnings from its oil palm division amid higher CPO ASP and lower cost of production, and better log and plywood production.
■ Reiterate Add with an unchanged TP, supported by strong balance sheet and attractive valuation. Dividend yield of c.5-6% for FY24F is decent, in our view
Analyst:
Jacquelyn YOW
jacquelyn.yow@cgsi.com
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by MIDF
BUY – TP RM4.16
"Performance Largely In-Line with Seasonal Factors”
• Within Expectations
• Timber products; profit sinks into the red
• Oil Palm; higher average CPO price realized in line with industry average
• Earnings forecast; maintain
• Maintain BUY with a revised TP of RM4.16
Analyst:
MIDF Research Team
research@midf.com.my
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by RHB
Neutral – TP RM 3.65
" Slight Improvements In ESG Disclosure”
The plantation industry is at a crossroads. With rising costs, falling yields, little chance for landbank expansion - where can growth come from? Being a pure upstream player, we believe Ta Ann can always venture downstream, find ways to monetise its landbank or improve its rather limited ESG transparency. The counter is currently trading at 9.2x FY25F P/E, at the-high end of its peer range of 6- 10x. However, share price would be supported by its superior 6.5% FY24F dividend yield.
Analyst:
Hoe Lee Leng
hoe.lee.leng@rhbgroup.com
@realalvinang collectively, there are a bunch of reasons why and I think you covered some of the main ones. However, zoom in a bit from just a "plantation sector" into "selected plantation companies" and you might find some that are performing very well indeed.
For better or for worse, a lot of the "largest cap" plantation companies are no longer pure planters, but instead more like conglomerates including sime darby, ioi, klk, genp, and so on, with arms in solar, property, oleochems, etc. With them being so big cap, they carry the highest weightage in the plantation index.
Focusing on more pure planters, for example $UTDPLT / 2089 (UNITED PLANTATIONS BERHAD) , $KMLOONG / 5027 (KIM LOONG RESOURCES BERHAD) $TAANN / 5012 (TA ANN HOLDINGS BERHAD) $JTIASA / 4383 (JAYA TIASA HOLDINGS BHD) $TSH / 9059 (TSH RESOURCES BERHAD) , you would see that their share price gains range from amazing to not too bad in the recent few years.
What happened with utdplt, compared to the rest? And which other company could potentially replicate what utdplt has done in the past few years? I think that's worth studying.
PLANTATION
$SWKPLNT / 5135 (SARAWAK PLANTATION BERHAD) $SIMEPLT / 5285 (SIME DARBY PLANTATION BERHAD) $TAANN / 5012 (TA ANN HOLDINGS BERHAD) $CHINTEK / 1929 (CHIN TECK PLANTATIONS BERHAD)
Research by PB
Neutral
“Inventories Climb to 3-Month High”
Palm oil inventories in Malaysia continued on its uptrend in May with a marginal gain of 0.5% to 1.75m mt, the highest level in 3 months. YTD, CPO prices have averaged RM4,034/mt, compared to our full-year average target of RM3,800/mt. In view of higher production in subsequent months, we expect inventory to continue trending upwards, which may consequently exert downward pressure on CPO prices. Maintain Neutral on the sector.
Analyst(s):
Chong Hoe Leong
chonghoeleong@publicinvestbank.com.my
PLANTATION
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by MIDF
Neutral
“Estate Activity Remains Intact”
Stronger upstream activity in May. CPO output in May surged significantly to 1.70m tonnes (+13.5%mom; +12.3%yoy; +9.4%ytd) versus 1.52m tonne in prior year, riding contribution from most of the states particularly in the Kedah area (+78.6%yoy) and Kelantan (+25.3%yoy) as it benefited from dry weather environment on top of improved foreign labour productivity. Separately, the country’s FFB received by mills also jumped to 8.93m tonne (+16.2%yoy) with a higher average yield of 1.43 tonne/ha (+16.3%yoy) recorded, while average OER muted at 19.52% dragged by low crops cyclicity environment in most of the states.
Analyst(s):
MIDF RESEARCH
research@midf.com.my
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by Kenanga
Market Perform – TP of MYR 4.00
“Weak Timber Earnings Weigh ”
TAANN’s 1QFY24 results met our forecast but disappointed the market. Its 1QFY24 core net profit eased 9% YoY as improved plantations profits were more than offset by weaker timber earnings. Lower cost at its plantation operation will continue to drive earnings. We maintain our forecasts, TP of RM4.00 and MARKET PERFORM call.
Analyst(s):
Teh Kian Yeong
tehky@kenanga.com.my
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by PIB
Outperform – TP of MYR 4.90
“A Solid Start”
Excluding i) PPE written off (RM0.2m), ii) net realized FX gain (RM1.7m) and minority interests, the group kick started 1QFY24 with steady core earnings of RM36.1m, making up 16.5% and 17.7% of our and the consensus full-year expectations. Despite the lower-than-expected results, we expect to see a strong catch-up in the subsequent quarters led by a stronger recovery in FFB production. Maintain Outperform call with a new SOP-based TP of RM4.90 after rolling over our valuation to FY25. A first DPS of 15sen was declared for the quarter (vs 1QFY23: 10sen).
Analyst(s):
Chong Hoe Leong
chonghoeleong@publicinvestbank.com.my
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by RHB
Neutral – TP of MYR 3.55
“1Q24 Results Disappointed; Expecting a Better 2H24”
1Q24 net profit disappointed. While we expect better earnings prospects in 2H24 from improved timber productivity and reduced plantation unit costs, we believe valuations remain fair – Ta Ann is trading at 9x FY24F P/E, ie at the high end of its 7-10x peer range. The plantation division remains the key driver to earnings, comprising 92% of PB
Analyst(s):
Hoe Lee Leng
hoe.lee.leng@rhbgroup.com
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by MIDF
Buy – TP of MYR 4.10
“Performance Largely In-Line with Seasonal Factors”
After excluding the change in fair value of biological assets and forex gain, Ta Ann’s core PATAMI came in only at RM36.4m (-11.2%yoy), despite revenue being maintained at RM352.4m (+0.5%yoy). While this was largely considered within our/consensus estimates, making up about 17% and 18% of full-year estimates, given that 1Q is always the weakest results among the quarters due to low crop seasonality. Additionally, FFB and CPO production were also down by - 35.3%qoq and -32.3%qoq respectively, due to aforementioned factors.
Analyst(s):
MIDF Research Team
research@midf.com.my
$TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by Maybank
Buy – TP of MYR 4.29
“A slow start for 1Q24”
1Q core PATMI was off to a slow start due to low crop cycle and wet weather impacting log output, but it met our/consensus expectations. We expect earnings to play catch up, especially in 2H24. We maintain our EPS forecasts but raise our TP to MYR4.29 on 10.5x FY24E PER, its updated 5Y mean (from MYR3.67 on 9x FY24E PER), and to be more aligned to SMID cap peer valuations. Given 16% upside potential, we upgrade TAH to BUY. Net DY of >6% (based on 60% DPR) is attractive, backed by its net cash of MYR270m (ie. 16% of its market cap).
Analyst(s):
Ong Chee Ting, CA
ct.ong@maybank-ib.com
PLANTATIONS
$SWKPLNT / 5135 (SARAWAK PLANTATION BERHAD) $TAANN / 5012 (TA ANN HOLDINGS BERHAD)
Research by PIB
Neutral
“Inventories Rose Unexpectedly in April”
Palm oil inventories in Malaysia surprisingly reversed in April after shrinking for 5 consecutive months as production continued to recover while exports weakened. The bearish data sent the CPO futures to RM3,790/mt, down 1.1%. YTD, CPO price averaged at RM4,054/mt. In view of higher production in the subsequent months, we expect inventory to continue trend uptrend, which may exert further pressure on CPO prices in the near-term. Maintain Neutral on the sector.
Analyst(s):
Chong Hoe Leong
chonghoeleong@publicinvestbank.com.my
Upstream Plantations Expected to report improving YoY results
...or so says CGS International (no longer CGS CIMB)
CGS issued a sectoral update report few days back, after most planters had released their monthly/quarterly disclosures on production. The stocks mentioned here are $GENP / 2291 (GENTING PLANTATIONS BERHAD) $IOICORP / 1961 (IOI CORPORATION BERHAD) and $TAANN / 5012 (TA ANN HOLDINGS BERHAD) ... of which GenP they view positively because of their landbank and property in Johor, IOI negatively because of their downstream exposure, and Ta Ann positively because it's cheap.
Very interesting.
There are also a few other points from the report that I think it's worth paying attention to, which I briefly summarize here.
1. Total FFB produced for the companies in their universe fell by 1% yoy, but CPO output increased ~40% yoy. on a QoQ basis, generally the whole industry would experience declines as seasonal factors kick in.
2. Avg CPO price in 1Q was RM 3983/MT.
3. CGS expects improvements in YoY results mainly due to improved production, stable CPO prices, and decreasing fertiliser costs. Upstream companies are expected to report robust 1Q results, but a slowdown in the downstream segment might impact more integrated palm oil companies.
4. They foresee a good support for CPO prices above the RM 3800 level.
5. Interestingly, they say that 18x PE is a *reasonable* valuation.
6. They also maintain their buy call on Ta Ann for its "attractive valuation" at 10x PE, net cash position, "decent" RoE (of around ~8.7%) and dividend yield of around 5%.
For the most part, I will ignore their call on GenP as it becomes more like a pseudo property stock which, imo, is not so relevant when talking about palm oil plantation companies. As in, if I wanted a plantation company, there are cheaper options; if I wanted a property company, there are also cheaper options.
***
What actionable insights can we take away from here?
7. Looking at the reported numbers, it is surprising to me that many estates actually report a decline YOY in terms of FFB harvests. QOQ declines are very expected, as I had elaborated before, since Q1 is almost always low season due to weather phenomenon. Which companies buck the trend of declining harvests YOY? Those would be the ones I would pay closer attention to, at this signifies that the companies are doing something right compared to the broader competition.
8. Looking at MPOB statistics, we get a good "benchmark" of what an average plantation's operational matrix is like;
- Avg FFB yield at 3.5 MT per hectare
- Avg OER at 19.7%
From the above we can have 2 takeaways:
i) Which companies are outperforming the national average?
Over the long term, investing in the top companies in a given sector (especially such an important one in Malaysia) would probably be a smart idea, and the national gold standard, in my opinion, $UTDPLT / 2089 (UNITED PLANTATIONS BERHAD), is already running circles around their competition. Typically, industry leaders tend to be priced a premiums to the average, which makes sense.
ii) Which companies are *underperforming* the national average?
This shows potentially room for unexpected growth and operational improvements, which could be a surprise upside if things have not yet been priced in as typically these companies would traded at a discount to the industry average. One way to verify is to check their track record, and see whether or not the operational performance has indeed been slowly improving so you're not just blindly betting on a company to improve, but have good reason to believe so.
An analogy to the above would be:
It's far easier to improve your marks in an exam from 50% to 70%, than it is to improve it from 90% to 100%.
Hope this offers a fresh perspective on looking at plantations!
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