Credit Suisse goes bull on Ta Ann

Read this article posted on Business Times. Plywood price rebound a boon to Ta Ann

The first paragraph reads

• TA ANN Holdings Bhd, one of the largest timber companies in the country, has been upgraded to "outperform" from "neutral" by Credit Suisse on signs that plywood prices are starting to rebound after falling for the last 12 months.

I was left curious.

I used Globalwood website as my indicator for plywood prices.

This is Dec 2007 Market prices link: http://www.globalwood.org/market1/aaw20080202a.htm

This is Jan 2008 Market prices link: http://www.globalwood.org/market1/aaw20080101a.htm

This is Feb 2008 Market Prices link: http://www.globalwood.org/market1/aaw20080202a.htm



Perhaps my eyes are failing but do I see plywood prices rebounding? Do you? Or maybe I am using a poor website?

The article then continues..

• The fresh target price for Ta Ann is RM9.20 a share, more than a third of the stock's last trading price.
  
  According to Credit Suisse, Ta Ann's share price, historically has a 74 per cent correlation with plywood prices.
  
  It noted that in the last cycle, plywood prices bottomed in December 2005 and its share price surged by up to 51 per cent when plywood prices rose in 2006.

Ta Ann closed yesterday at 6.65!

Now given the fact that Ta Ann was only trading a low of 5.65 on Feb 15th, this would mean that Ta Ann's share price has already appreciated by a whopping 1.00.

See the nice chart posted on BTimes.



Assuming that the date of the Credit Suisse report is fresh and not too out-dated, then surely one would ask why after the share price had already increase so much, then only publish such a bullish article on Ta Ann with a whopping target of rm9.20?

"Macam Mana Ni?"

Gee thanks Credit Suisse!

The article then continues

• "Ta Ann's plywood prices bottomed after falling 38 per cent from the high in late 2006. Prices are just starting to recover. The risk to our target price is if plywood prices don't recover or if there is a total ban on logging in Malaysia," the report stated.
  
  Ta Ann, which exports 98 per cent of its plywood to Japan, had a challenging time in 2007, hurt by an 18 per cent drop in Japan's plywood imports, the steepest drop since the Asian financial crisis a decade ago.
  
  For the year ended December 31 2007, Ta Ann's sales grew by five per cent to RM669.6 million while net profit fell 26 per cent to RM97 million.

Ta Ann net profit fell 26%.

Of course, they would argue that stocks should be valued based on what they earn in the future, which I accept. However, are plywood prices rebounding?

How?