Maybank Investment Bank (Maybank IB) said the extension of Ta Ann Holdings Berhad's timber licence concession by 30 years will give its timber division long-term sustainable revenue visibility.
According to the investment bank, the 30-year concession will enable Ta Ann to maintain a steady supply of sustainable natural logs while also giving the market assurance that forest resources are being managed properly despite dwindling natural log supplies.
Meanwhile, its planted forest concession of 30,971 ha (expiring in 2057), cultivated with mostly fast-growing species, is increasingly playing a bigger role in boosting sustainable logs production volume which accounted for c.30 per cent of group's logs production volume in 2022 (2021: c.20 per cent).
"Operationally, we understand nothing has changed although the terms of the new concession are unknown for now. We make no change to our forecasts but highlight that Ta Ann's oil palm division has grown to become its key earnings contributor at 88 per cent of the group's fiscal year 2022 (FY22) pre-tax profit," the firm said in a note today.
In Ta Ann's recently published Annual Report 2022, it highlighted that its three active Forest Management Units (FMUs) licenses, namely Kapit FMU, Pasin FMU, and Raplex FMU, covering a total area of 346,021 ha have been renewed for 30 years till 2053.
Maybank IB said that previously, these licenses were temporarily renewed annually (since 2015 for some concession areas) as Ta Ann has been consolidating and amalgamating its timber licenses in the Song-Kapit region since 2014 when it embarked on a sustainability journey towards MTCS PEFC forest management certification.
Ta Ann is still a BUY for Maybank IB, with a RM3.72 target price.