TAANN: Earnings Exceed Expectations on Cost Efficiency, Neutral Rating Maintained

An investment bank research report indicates that Ta Ann Berhad’s core earnings for the second quarter of 2025 (2Q25) and the first half of 2025 (1H25) largely exceeded expectations. The robust performance was primarily attributed to improved fresh fruit bunch (FFB) output and stronger crude palm oil (CPO) average selling prices (ASPs) during the period, alongside a notable recovery in its timber segment.

Performance Overview

The company recorded a 12% quarter-on-quarter (QoQ) and a significant 62% year-on-year (YoY) increase in 2Q25 core profit. This strong showing propelled 1H25 earnings to MYR85.4 million, marking a 40% YoY growth, which accounted for 46-48% of both the investment bank’s and street estimates. Driving this growth was a 3% YoY increase in FFB output and a 12% YoY rise in CPO ASPs during 1H25. In recognition of its performance, Ta Ann declared a 10 sen dividend for 2Q25, bringing the 1H25 total to 20 sen, representing a 92% payout ratio. The bank maintains its forecast for a full-year 2025 dividend per share (DPS) of 32 sen.

Segmental Performance and Cost Efficiencies

The timber segment demonstrated a significant turnaround, with its Pre-Tax Profit (PBT) improving to a deficit of MYR0.7 million in 2Q25, a substantial recovery from the MYR5.2 million loss in 1Q25. This led to a 1H25 Loss Before Tax (LBT) of MYR5.9 million. Log output surged by 52% QoQ and 26% YoY in 2Q25, though 1H25 log output remained 6% lower YoY. Despite a 20% YoY drop in log sales volume, log ASPs rose 9% in 1H25. Conversely, plywood sales volume fell 30% YoY, with ASPs slightly declining by 2% YoY, and costs remaining elevated at USD520/cu m (+8% YoY). Management aims for the timber division to achieve a breakeven level in FY25F.

The plantation segment saw its 2Q25 PBT increase by 3% QoQ and 35% YoY, boosted by stronger FFB output (+8% QoQ, -1% YoY). However, this was partially offset by a 14% QoQ decline in CPO ASPs (+3% YoY). Overall YTD-July FFB output fell 4% YoY, primarily due to dry weather in July.

Cost efficiencies played a crucial role, with unit costs declining 5% QoQ in 2Q25, bringing 1H25 costs to MYR2,100/tonne, a 9% YoY reduction, aided by higher output and lower fertiliser costs. Fertiliser application remains on track.

Future Outlook and Investment Rating

Looking ahead, the company expects 2H25 earnings to remain solid, driven by continued improvements in output and the recovering timber segment, albeit tempered by moderating CPO ASPs. Management guided for full-year log output of 178k cubic meters (or -3% YoY) and anticipates plywood sales volume to pick up as the Japan market gradually recovers.

Analysts from RHB, the investment bank, maintained a “Neutral” rating for Ta Ann with a target price (TP) of MYR3.65, suggesting an 8% downside from its last traded price of MYR3.96. This valuation reflects the company’s fair trading at 10 times its forecasted FY26F P/E, which is within its peer range of 6-11 times. The report also notes that Ta Ann’s FY26F dividend yield of 8% continues to support its share price.