May 17, 2010

TA Enterprise Target Price RM1.80

TA Enterprise (RM0.67; Buy; Price Target: RM1.80; TAE MK)
Declared first and final dividend of 2.5% for FY2010 In an announcement to Bursa, TA Enterprise (TAE) declared a first and final dividend of 2.5% or 2.5 sen (less tax), for the financial year ended 31 January 2010. This worked out to be approximately RM32m or 35% payout, which is below our target of 50% payout. TAE cited that the lower payout (FY09: 4.5%) was due to the need for the Group to conserve cash for upcoming projects. 

TAE also announced a change in the Group’s dividend policy to 40% - 60% of the Group’s PAT excluding TAG’s profit contribution but including dividend receivable from TAG for the same financial year. Previously, TAE’s dividend policy was 40% - 60% of the Group’s net profit. 

Our current assumption of 3.5 sen for FY11 is based on 50% payout for TAE and TAG. Assuming this drops to 40% for TAE and 20% for TAG, our forecast DPS falls to 1.9 sen. Meanwhile, TAE’s 70%-owned subsidiary TA Global (TAG) declared a first and final dividend of 0.3% (or approximately 18% payout) for the financial period ended 31 January 2010. Note that TAG’s dividend policy is 20% - 50% payout.

Maintain Buy on TAE with TP of RM1.80 based on SOP. We like TAE for its diversified earning base (property development, office and hotel business via TAG, and its cash generating stock broking business). TAE is also a cheaper proxy to Bursa Malaysia (Fully Valued, TP RM7.65) to capitalize on recovering market volumes. 

by HWDBS Vickers