Analysts are wary that this could be offset by lower-than-expected sales volume for Ta Ann’s plywood, its flattish FFB growth target, as well as slightly higher CPO unit costs.
KUCHING (May 3): Ta Ann Holdings Bhd (Ta Ann) is expected to continue seeing earnings growth driven by its plantation and timber segments.
However, analysts are wary that this could be offset by lower-than-expected sales volume for its plywood, its flattish fresh fruit bunches (FFB) growth target, as well as slightly higher crude palm oil (CPO) unit costs.
In a report, the research team at RHB Investment Bank Bhd (RHB IB) pointed out that its plywood segment remains tough.
“The segment was in the red in FY23, due to RM10 million write-off for the veneer inventory in Tasmania – driven by declining demand from Japan and a sharp escalation of freight charges.
“Although this situation remains in 1Q24, as Japan runs down stocks, management expects demand to start picking up in 2H24 as restocking activities resume,” the research team said.
It trimmed its FY24 output volume to reflect a three per cent decline from 10 per cent, coming from lower timber production.
“We expect ASPs to remain flattish at US$550 to US$565 per cubic metre in FY24 to FY26, in line with management guidance at US$550 per cubic metre, with 1Q24 prices of US$530 per cubic metre.
“All in, despite the current headwinds, we expect the timber division to remain in the black in FY24 to FY26,” it said.
As for its palm oil segment, RHB IB said, 1Q24 FFB production dropped 35 per cent q-o-q and flattish y-o-y, caused by the wet season in Sarawak.
“Consequently, Ta Ann has revised its FY24 FFB production growth target to five per cent from 10 to 12 per cent but expects production to rebound significantly in 2H24 with drier seasons and better fertiliser application in FY23.
“Hence, we cut our FY24 FFB growth expectations to a more conservative three per cent while keeping our FFB growth assumptions of five to six per cent for FY25 to FY26.
“We also marginally increase our CPO unit cost to RM2,670 per tonne from RM2,600 per tonne to reflect more aggressive manuring activities in FY24, above Ta Ann’s guidance of RM2,400 per tonne,” it said.