KUALA LUMPUR: Better crude palm oil (CPO) average selling price (ASP) and higher fresh fruit bunches (FFB) output are expected to drive Ta Ann Holdings Bhd's earnings in the second quarter (Q2) of 2022.
Maybank Investment Bank Bhd (Maybank IB) has forecasted Ta Ann's Q2 2022 net profit to be in the region of RM105 million to RM110 million, bringing the first half of 2022 (1H22) net profit to RM181 million to RM186 million.
The bank-backed research firm said Ta Ann is on track to achieve the firm's RM309 million full-year net profit forecast.
"Q2 2022 results will be driven by a strong oil palm plantation contribution underpinned by better CPO ASP and higher FFB output.
"Given little-to-no forward sales, we believe Ta Ann will be a prime beneficiary of the historic high CPO ASPs in Q2 2022.
"We expect Ta Ann's CPO ASP for Q2 to broadly mirror that of Malaysia Palm Oil Board's (MPOB) ASP of RM6,550 per tonne," it said.
While Maybank IB Research expects Ta Ann's net profit to be good, the firm cautioned that the Q2 headline profits could be dragged down by anticipated fair value (FV) loss on biological assets following the sharp decline in CPO prices towards the end of June.
The firm believes Ta Ann could reverse a large part of the RM28.5 million FV gain on biological assets recorded in Q1 2022 in Q2.
"Nonetheless, these accounting FV gains and losses are typically discounted in arriving at our core net profit analysis.
"We are maintaining our earnings forecasts, premised on CPO ASP assumptions of RM5,000 per tonne for the financial year 2022 (FY22) and RM3,400 per tonne for FY23.
"We raise Ta Ann to a Buy (from Hold) with an unchanged target price of RM4.06," it added.