PETALING JAYA: Plantation and timber-based Ta Ann Holdings Bhd is expected to fully benefit from the elevated price of crude palm oil (CPO), as the bulk of its sales are on the spot pricing basis for this year.

       The group’s timber division also seems to be on a recovery path and earnings will likely no longer be a drag on its profitability going forward, said RHB Investment Bank Research.

       The research house has increased Ta Ann’s earnings estimates for financial year 2021 (FY21), FY22 and FY23 by 29%, 12% and 11%, respectively, after revising upwards its average selling price assumptions by 8% to 10% for all divisions.

       “Ta Ann does not sell its CPO forward and should, therefore, be able to fully benefit from the current high prices.

       “The log and plywood price hikes are now expected to be more sustainable, given the continued tight supply in key markets,” RHB Research said in its latest report.

       It has also upgraded Ta Ann to a “buy” with a new target price of RM3.05 based on an unchanged 10 times FY22 estimated price earnings ratio.

       In the first half of FY21, Ta Ann’s core earnings tripled to RM93.5mil, bolstered by stronger plantation earnings and a surge in earnings contribution from its 32%-owned Sarawak Plantation Bhd.

       In view of the stronger-than-expected results, PIVB Research revised upward its FY21 earnings forecast by 31%, after inputting higher profit margin. It has maintained an “outperform” call on Ta Ann with an unchanged sum-of-parts-based target price of RM3.83 per share.

       On the group’s outlook, PIVB Research said the management has retained its fresh fruit bunch (FFB) production target of 750,000 tonnes for 2021.

       The first half of FY21 FFB production made up 39% of the full-year target and it expects production to peak this month.

       In addition, the fertiliser application was slower-than-expected, reaching 35% due to wet weather condition.

       On the new replanting activities, Ta Ann planned to replant up to 3,000ha, with 700ha to 1,000ha replanted during the first half of this year.

       As for the shortage of palm fruit harvesters, the group is facing up to 30% worker shortage and has redeployed its workers to more productive yield areas.

       PIVB Research also said Ta Ann’s management has guided that the dividend payout could be higher this year in tandem with a stronger earnings outlook.