TAANN: Strong Performance Driven by Operational Efficiencies and Plantation Growth
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent research report from TA Securities highlights a robust financial performance, with the company’s core net profit for the full year 2025 (FY25) registering a marginal increase to RM211.2 million. This result was largely in line with both the investment bank’s and market expectations, achieving 100% and 102% of their respective forecasts.
Performance Review
The strong showing was underpinned by a 28% year-on-year (YoY) increase in fourth-quarter (4QFY25) sales. Both the timber and palm oil segments contributed significantly to this growth. Timber sales advanced 27% YoY to RM538 million, driven by a 59% surge in log volume and a 21.7% rise in plywood sales, despite some softening in average export prices for both logs and plywood. Meanwhile, palm oil sales also saw a 27.2% YoY increase to RM538 million, primarily fueled by stronger fresh fruit bunch (FFB) production, even as average crude palm oil (CPO) prices experienced a slight decline.
The group’s 4QFY25 core profit expanded 22% YoY, moving from RM49 million to RM60 million. This improvement was largely attributable to strengthened plantation earnings, which surged 48% YoY to RM123.2 million, and significantly narrowed losses within the timber segment. The timber segment’s losses nearly halved to RM11 million, thanks to a turnaround in its logs unit. Crucially, the company demonstrated impressive cost efficiencies, with CPO production cost averaging RM1,700 per metric tonne for the quarter, reducing the full-year production cost to RM2,000 per metric tonne.
Future Outlook
Management maintains a positive outlook for the upcoming year, setting an ambitious FY26 FFB production target of 770,000 metric tonnes, representing a 12% YoY increase, based on an average FFB yield of 18 metric tonnes per hectare. The company has completed its fertilizer application for the past two years but anticipates a 5% increase in fertilizer costs for the current year. Strategic initiatives include aggressive replanting activities targeting 2,900 hectares and a planned acquisition of an advanced harvesting machine to enhance efficiency. Additionally, the potential monetization of a 2,000-hectare planted area along the Pan Borneo Highway could further bolster the company’s financial position. Despite the expected increase in fertilizer costs, the overall production cost is projected to see only a slight rise to RM2,100 per metric tonne.
Investment Recommendation
TA Securities has maintained its “” recommendation for the stock, with a target price (TP) of RM0.25, reflecting a potential upside of 25.0% from its last traded price of RM0.20.
