Fundamental Pick: TAANN

Ta Ann Group is resource-based company based in Sarawak, Malaysia. It’s main business being forest concession licensee, timber harvesting, shipping operations and downstream wood-based businesses. Also, it has oil plantation land bank of 87,000 ha with mature palms of more than 40,000 ha.
Ta Ann has solid balance sheet as evidenced in its continued growth of assets and shareholder’s fund over the years.

Ta Ann 5 years balance sheet

Ta Ann 5 years balance sheet

Ta Ann’s net profit has been steady, and back on track after experiencing decline in year 2012-13. It delivered 50.8 sen basic EPS for year 2015 that translate to Price/Earning of 6.8 (based on RM3.42 last closed).

Ta Ann 5 years P&L

Ta Ann 5 years P&L

Ta Ann has maintained positive cash flow from operating activities and have remarkable cash reserve to meet its growth needs.

Ta Ann 5 Years Cash Flow

Ta Ann 5 Years Cash Flow

 

Here are the key ratios for TA Ann based on financial year 2015 results:

  1. Current Ratio = 2.00 (High ability of paying off its current debts)
  2. Liability to Equity Ratio = 0.8 (Healthy liability level)
  3. Net Profit Margin = 17.09% (pretty good based on my criteria of 5% minimum profit margin)
  4. Interest cover of 9.00x which indicates that it has good capacity for future borrowing

Ta Ann’s share price has been consolidated from RM 4.60 early this year to just above RM3.40 last week. One reason being the strengthening of Ringgit against USD posses some foreign exchange risk to TA Ann.  TA Ann share price should experience upside catalyst supported by weakening Ringgit and improved CPO price.

Based on my calculation, TA Ann’s fair value would be RM4.90.

Disclaimer: None of the strategies, stocks or information discussed or presented are financial or trading advice or recommendations. The author assumes no liability including for errors and omissions. Everything presented are the author’s ideas and opinions only.  The author may or may not at any time be holding securities discussed. Trade at your own risk.

 

 

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