Positive for sentiment. Ta Ann’s proposed 1-for-5 bonus issue not only helps to improve liquidity but it will “recapitalize” its share base as its seeks to achieve sustainable growth in the long run. The stock continues to trade at an attractive 10.9x 2013 PER, with low EV/planted ha of ~MYR42,600 (43% discount to industry average). It is also poised to deliver a 15% 3-year net profit CAGR. Maintain Buy and MYR9.00
TP on 15x 2013 PER. Ta Ann is our top pick among the plantation stocks.
1-for-5 bonus issue. Ta Ann has proposed yet another 1-for-5 bonus shares (up to a maximum of 61.8m new shares), its fourth bonus issue since 2006. The proposed bonus shares enables shareholders to have
greater equity participation in riding on Ta Ann’s growth prospects as well as enhancing its liquidity. The bonus issue has no impact on our net profit forecasts. Subject to shareholders’ approval, Ta Ann expects the bonus issue to be completed in 2Q12.
Young palm tree of ~5 years to propel growth. Ta Ann is a mediumsized plantation player with 30,911 ha (Dec 2011) of planted oil palm estates in Sarawak. With 33% of the planted area still immature (and oldest tree barely 12 years), Ta Ann is poised to deliver a robust 18% 3-year 2011-14 CAGR in FFB output to 0.76m tonnes FFB by 2014. Its exponential double-digit FFB growth phase is expected to last till 2017.
Stock will continue to re-rate. Ta Ann’s business model has evolved significantly from the days of being a boring and cyclical timber player into a more defensive oil palm plantation player with growth. In 2011,
77% of Ta Ann’s profit before tax was derived from its oil palm division. Yet, it trades at an unjustified two-to-four PE multiples lower than similar size plantation peers and industry leaders in Malaysia. Moreover, Ta Ann has one of the highest earnings growth prospects among the plantation stocks under our coverage.
-Maybank IB
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