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Wednesday, June 24, 2015

Maybank Research sees Ta Ann as undervalued

KUALA LUMPUR: Maybank Investment Bank Research has retained its target price of RM5.90 for Ta Ann, which is 54% above the last traded price of RM3.82.
It said the timber-plantations company is undervalued with its current valuations at 10 times 2016 price-to-earnings ratio (PER) and enterprise value/planted ha of RM24,000. Its target price is pegged to 15 times 2016 PER.
Ta Ann has entered into two new joint ventures (JVs) with Pelita Holdings (PHSB) and Native Customary Rights (NCR) landowners to develop 16,917ha of plantable land in Sarawak.
To recap, on Dec 28, 2012, Ta Ann signed three JVs with PHSB and NCR landowners to develop a cumulative 23,412ha of plantable land in Sarawak.
Due to lack of interest by the land owners under the 2012 agreements, these new JVs are signed as replacement projects. Management expects planting to only start two to three years later after undertaking surveys, environmental impact assessments and obtaining approvals from the regulatory bodies.      
“Our earnings forecasts are unchanged as we have yet to factor in the previous JVs and no capex was incurred. However, these new JVs would affect its future planting plans.
“Ta Ann’s plantable area of 44,000ha (excluding the JVs) would be fully planted in 2015. Under the 2012 agreements, planting was to start in 2016.
“However, the new planting under the new JVs can only start in 2018. Nevertheless, we believe Ta Ann will continue to scout for more landbank for future planting,” it said.
Maybank Research said Ta Ann’s young average tree age profile of seven years would continue to support a strong FFB output growth at 18% 3-year forward CAGR. 
Elsewhere, its timber division could provide earnings upside with: i) the potential turnaround of its Tasmania plywood division, ii) potentially higher log export prices due to reduced log supply following Sarawak government’s campaign to curb illegal logging.

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