Ta Ann Holdings Berhad's (TAANN) performance in the first half of FY24 has been underwhelming, largely impacted by ongoing headwinds in its timber operations. Despite a promising start in plantation earnings, the company faced significant setbacks in its timber segment, leading to a disappointing overall result.
Analysts have adjusted their forecasts to reflect these dynamics. Kenanga Stock Broking House has downgraded its FY24-25 core earnings per share (EPS) estimates by 14% and 11%, respectively, and reduced the target price (TP) from RM4.00 to RM3.60. The recommendation has been maintained at MARKET PERFORM. In contrast, TAANN's recent performance has prompted other analysts to revise their targets. RHB Stock Broking House has lowered its FY24-26 EPS forecasts by 2%-6%, now projecting a TP of RM4.03, down from RM4.29, but retains a BUY call. Meanwhile, MIDF Stock Broking House maintains a BUY rating with a revised TP of RM4.16, reflecting confidence in TAANN's oil palm segment despite the timber sector's struggles. Last but not least, CGS Stock Broking House maintains an ADD rating as well for the company.
For the first six months of FY24, TAANN's core net profit fell short of expectations, standing at RM63.6 million, which represents just 35% and 33% of the full-year forecasts by analysts. The plantation segment showed resilience with improved earnings due to higher crude palm oil (CPO) prices and increased fresh fruit bunch (FFB) output. However, these gains were overshadowed by timber division losses. The timber segment recorded a pre-tax loss of RM5.8 million in 2QFY24, contrasting with a profit of RM4.5 million in the preceding quarter. This downturn was attributed to weaker demand and lower sales prices for logs and plywood.
The outlook for the remainder of FY24 presents a mixed picture. The plantation division is expected to continue its positive trajectory, buoyed by firm CPO prices. Analysts anticipate a full-year average CPO price of around RM3,800 per metric tonne, which should support earnings. On the other hand, timber operations are likely to remain under pressure due to muted demand, economic uncertainties, and higher borrowing costs that could dampen construction activities.
Looking forward, TAANN is expected to experience a rebound in 2H24, driven by improved weather conditions that should benefit timber production and higher palm oil output. The company's efforts to mitigate the impact of weak timber performance will be crucial as it navigates the remainder of the fiscal year.
