ta ann holdings

 
 

Kenanga lowers CPO price forecast for 2019 -2020

PETALING JAYA: Kenanga Research has cut its crude palm oil (CPO) price forecast for 2019-2020 to RM2,000-RM2,200 from RM2,400-RM2,200 per tonne.

This is premised on the palm-oil biodiesel ban from the European Union (EU), a potential CPO inventory pickup in the second half of the year and mounting trade war tensions depressing CPO prices.

Following the revision, the research house slashed planters’ earnings by 6-97% for FY19 and 7-79% for FY20E with pure upstream players such as IJM Plantations Bhd and Hap Seng Plantations Holdings Bhd taking bigger hits.

“We believe planters’ earnings will hit a rough patch in coming quarters with CPO prices hovering around current levels, which will likely overshadow any production pickup in the second half of 2019.”

Kenanga said while biodiesel mandates seem to be panning out well (expected to absorb 13% of CPO production in Indonesia and 4% in Malaysia), the intensifying US-China trade war tensions are likely to discourage soybean oil prices like what happened last year.

“In our opinion, this will dwarf any positive trade/demand impact on CPO and keep its prices under pressure in the near term, as the two commodities are close substitutes with their prices highly correlated (>0.90).

“Coupled with a potential inventory pickup in the second half of 2019 (to 3.0-3.5 million tonnes levels), we believe the possibility of a strong CPO price recovery in the near term can be practically ruled out, leaving 2019 an unexciting year for most planters.”

Nevertheless, it said should the Chinese and/or biodiesel demand be stronger-than-expected, resulting in falling stockpiles in the second half and a sharp recovery in CPO prices, it would review the sector call and target prices of planters under its coverage.

Kenanga downgraded the plantation sector from “neutral” to “underweight”, with only Ta Ann Holdings Bhd set to outperform due to its core net profit compound annual growth rate of 12.8% driven by improved log production, profitable status and attractive 4% dividend yield.

The research house was previously hopeful of a handsome CPO price recovery by June 2019 as stockpiles fall and demand from China picks up.

“However, despite the positives nicely falling into place, negative news flows vis-à-vis palm-oil biodiesel ban from the Europe has proven to be a major killjoy.”

“As we move closer to the second half, chances of CPO price reaching our 2019 target of RM2,400 per tonne are becoming next to zero.”


Plantation firms face earnings pressure in Q1, Maybank IB Research says

KUALA LUMPUR, May 13 — Maybank IB Research expects the plantation sector to see continued earnings pressure in the first quarter of 2019 (Q1 2019), mainly on weak spot crude palm oil (CPO) average selling price (ASP). In a note today, it said…


Green shoots of recovery for CPO

PETALING JAYA: The worst is over for the plantation sector as palm oil exports are expected to make a strong recovery this month, after a dismal fourth quarter last year (Q4 18) and a surprise spike in inventory last month.

Last month, palm oil inventories unexpectedly rose to 3.05 million tonnes (MT) as exports declined by 21.2% month-on-month, dragged by weaker demand from China while crude palm oil (CPO) price performance was under pressure due to concerns about oversupply.

“The palm oil industry has less than three months to pare down its inventory to an optimal level before the high production season kicks in. Nevertheless, we think demand will likely pick up this month after a long holiday break in China,” PublicInvest Research said in a report today.

It expects inventory to drop below 3 million MT this month, on the back of a strong recovery in exports. According to Intertek, Malaysian palm oil exports rose 10.7% year-on-year to 435,464 MT in the first 10 days of March.

In Q4 18, the sector experienced weaker CPO product prices amid record high inventory levels in the country and higher inventory levels carried over by plantation companies as selling prices were unattractive.

During the quarter, inefficient and small plantation companies were in the red as CPO prices fell below their break-even level. In addition, the sector saw higher cost of production due to a decline in palm kernel credit and higher fertiliser cost, caused by the weaker ringgit.

“Under our coverage universe, Q4 18 realised CPO average price was down to RM1,878 per MT versus MPOB’s RM1,920 per MT, pressured by the current high inventory levels and strengthening of the ringgit. FGV Holdings achieved the highest average CPO price for the quarter at RM2,053 per MT followed by IOI Corp’s RM1,932 per MT while TSH Resources’ RM1,780 per MT was the lowest,” said PublicInvest Research.

It maintained its “neutral” call on the plantation sector with a full-year average CPO price forecast of RM2,200 per MT. Ta Ann Holdings remains its top pick based on strong turnaround in the plywood segment and expected improvement in plantation, driven by a double-digit growth in fresh fruit bunches (FFB) production.

“CPO price futures have staged a strong rebound since hitting a two-year low of RM1,966 per MT last November, rising more than 9% to RM2,120 per MT. In general, most plantation companies foresee higher CPO price this year with a range of RM2,200 to RM2,500 per MT,” it added.

Meanwhile, Hong Leong Investment Bank (HLIB) Research cautioned that higher palm output may offset the improvement in exports, which may limit CPO price upside in the near-term.

“While exports will likely improve from March 2019 onwards (as palm oil exports typically improve when winter season nears end), this would likely be offset by seasonally higher palm output, resulting in gradual drawdown in palm inventory, hence capping near-term CPO price upside,” it said in its report.

It maintained its average CPO price assumptions of RM2,300 per MT for 2019 and RM2,400 per MT for 2020, and kept its “underweight” rating on the sector.

“We believe pricey valuations (following recent share price appreciation of most plantation companies) will cap near-medium term share price performances of plantation players,” it said.


KLCI dips 0.32% in line with edgy regional markets

e8658cb4a1b6dba2ad4d07e8c6d174b9_XL

KUALA LUMPUR (Jan 4): The FBM KLCI retreated 0.32% in early trade this morning, tracking edgy regional markets following the overnight slump at Wall Street. At 9.05am, the FBM KLCI fell 5.43 points to 1,670.40. The early decliners included Nestle (M) Bhd, British American Tobacco (M) Bhd, Allianz Malaysia Bhd, PPB Group Bhd, Revenue Group Bhd, Tenaga Nasional Bhd, Pentamaster Corp Bhd, Ta Ann Holdings Bhd and IHH Healthcare Bhd. Global markets were on edge on Friday as dire U.S. economic data slammed Wall Street and pushed investors to betRead More


Upside expected for Ta Ann following new certificate

KUCHING: Upside is expected for Ta Ann Holdings Bhd’s (Ta Ann) timber and plantation divisions which will lead to growth in 2019-2020E earnings, analysts project. Affin Hwang Investment Bank Bhd (AffinHwang Capital) expected Ta Ann’s future earnings to grow, underpinned by higher contributions from both the group’s plantation and timber divisions. “We expect log production […]


Indonesia’s moratorium to be big blow for late entrants to plantations

KUCHING: Indonesia’s moratorium on plantation permits will be negative to those who are late entrants in the country’s plantation industry. According to a Reuters article, Indonesia’s government issued a presidential instruction to place a moratorium on new permits for palm plantations for three years, as part of efforts to protect forests, a presidential official said […]


Indonesia’s palm oil move will hit new players

PETALING JAYA: Plantation players who are relatively new in the Indonesian market or those with significant plantable landbank in the country are likely to be impacted negatively by the moratorium on new palm oil development, according to PublicInvest Research.

Indonesia, the world’s largest palm oil producer announced on Friday that it has signed a three-year moratorium on new palm oil plantation development and will review existing plantation permits. The order is aimed at improving the sustainability of palm oil plantations.

The temporary ban is likely to improve productivity of small owners and also help clarify land ownership.

The research house is of the view that given Indonesia’s self-commitment towards the policy, there could be tighter implementation in terms of reviews of plantation permits such as Izin Lokasi (Location Permit), Izin Usaha Perkebunan (Plantation Permit), Hak Guna Usaha (Development rights) across all provinces.

To recap, Indonesia and Norway had inked an US$1billion (RM4.13 billion) agreement for a moratorium on new permits to clear primary forest in a bid to reduce greenhouse gas emissions from deforestation, forest degradation and the destruction of peat – in 2010.

However, studies show that Indonesia failed to reduce its emission from deforestation and forest degradation while more than 9.9 million ha was converted into plantation area overs 2010-2015.

Going forward, moratorium is expected to slow down the production growth of fresh fruit bunch, which in turn will support palm oil prices and ease concerns on oversupply.

The move is also expected bring down the growth of average crude palm oil from 2020 onwards, which was initially projected to grow at 3%.

Indonesia, which accounts for 51.7% of global palm oil production, is expected to see a year-on-year increase of 5.5% to 38.5 million tonnes this year.

Ta Ann Holdings Bhd is the only Malaysian company unlikely to be affected by the policy as it has no exposure in Indonesia.

TSH Resources Bhd, which has close to 90% of its plantation landbank in Indonesia, has already slowed down new plantings (less than 500ha per acre) a few years ago.

Public Invest said yesterday that stocks under its coverage will not be significantly impacted as majority of them have almost fully planted their landbank in Indonesia.

Among the stocks covered by PublicInvest – IOI Corp, Kuala Lumpur Kepong, Sime Darby Plantations were rated as “neutral” while Genting Plantations and Ta Ann received “overweight” ratings.

The Plantation Index of Bursa Malaysia was down 26.77 points or 0.35% to 7,525.42 points.

Pinehill Pacific Bhd, which said it was selling its palm oil estate in Perak for RM413.75 million last week, jumped 22.7% yesterday closing at 54 sen. United Plantation Bhd was the second biggest loser for the day losing 30 sen of its share price to close at RM26.82 a piece.

KLK’s share price shed 0.1% to RM25, with 137,500 shares traded. Ta Ann lost one sen to RM2.73 with 2,600 shares traded.


Corporate earnings in Q2 ‘show some semblance of improvement’

PETALING JAYA: PublicInvest Research said the second-quarter's earnings report card showed some semblance of improvement following the previous quarter's letdown, but the uptick may not be structural in nature.

Positive surprises were evident in the auto and healthcare sectors, while the bleeding in the oil and gas sector seems to have abated. Manufacturing, however, remains a disappointment and airlines also surprised on the downside.

“Of some encouragement is the fact that none of the market-moving economic-defining sectors showed any significant worse for wear,” it said in a research note today.

For PublicInvest Research, the current quarter's earnings hits (above and/or in line) are at 68:32%, versus 60:40% in the first quarter.

With most of the current misses still cost-related, the research house has lowered its expectations again.

“The one encouragement, if any, is that sales trends for most still remain intact albeit muted, while upward revisions are rising slightly.”

As the market is fairly valued currently, PublicInvest Research is maintaining the 2018 year-end target for the FBM KLCI at 1,790 points.

On whether there is a further upside to the market, the research house said the earnings growth assumptions for 2018, 2019 and 2020 are 3.2%, 5.9% and 6.5%, respectively.

“On this score, we are suggesting a preliminary year-end 2019 FBM KLCI target of 1,900 points, though many odds could be stacked against its favour.”

PublicInvest Research is maintaining an “overweight” stance on the oil and gas and manufacturing sectors despite weakness seen in earnings. It also suggests selective exposure in the banking sector.

The research house continues to see value in the small- and mid-cap space, and retain most of its suggested picks despite year-to-date underperformances of some companies as it believes the current share price weaknesses are overdone.

“AMMB Holdings, Hibiscus Petroleum, Mega First, N2N Connect, Perak Transit continue to make up the core holdings in our suggested picks, in addition to CIMB Group and Tenaga Nasional. Ta Ann Holdings is newly included.”

MIDF Research noted that the aggregate reported earnings of FBM KLCI 30 constituents totalled RM11.42 billion in Q2, down 31.2% quarter on quarter and 27.4% year on year.

However, more pertinently, the aggregate normalised sequential growth was positive at +2.7% quarter on quarter while the normalised on-year number posted a much smaller negative at -3.2% year on year.

Within MIDF Research’s universe, merely 3% of stocks under coverage reported higher than expected earnings. Of the rest, 39% posted earnings that were lower than expected versus 58% which came within expectations.

It has trimmed the aggregate FY18 earnings estimate and FY2019 earnings forecast of the FBM KLCI constituents under its coverage by -0.2% to RM55 billion and 0.8% to RM57.2 billion, respectively.
MIDF Research is maintaining its end-2018 FBM KLCI target at 1,800 points.


Ta Ann’s Certificate for Forest Management award garners neutral views

KUCHING: Ta Ann Holdings Bhd’s (Ta Ann) recent Certificate for Forest Management award has garnered neutral views from analysts given that its earnings impact is likely to be minimal in the near term. In a filing to Bursa Malaysia, Ta Ann announced that the group’s Kapit Forest Management Unit (FMU), managed by wholly-owned subsidiary Tanjong […]


Ta Ann’s Kapit FMU attains Forest Management Certificate

KUALA LUMPUR: Ta Ann Holdings Bhd’s Kapit Forest Management Unit (FMU) has been awarded the Certificate for Forest Management (Natural Forest) under the Malaysian Timber Certification Scheme. The Kapit FMU is managed by Tanjong Manis Holdings Sdn Bhd, a wholly-owned unit of Ta Ann. In a filing to Bursa Malaysia yesterday, Ta Ann said the certificate […]