KUALA LUMPUR: Jaya Tiasa is still a cheap entry into the oil palm sector, although the stock has risen 40% since end-November 2015, said AmInvestment Bank.
“It is an FFB recovery play, aided by the weak ringgit and strong log export prices,” it said on Thursday.
Jaya Tiasa’s FFB yield is on a recovery path after achieving only 12.5 tonnes/mature ha for 2015 ended June after encountering labour shortage that led to the neglect of about 10,000ha of planted areas.
“It is on track to meeting our FFB production projection of 900,000 tonnes for 2016. For 2017, we are projecting a 19% year-on-year growth to over 1mil tonnes and 12% increase in 2018,” it said.
The research house maintains it Buy call on the company, with a higher target price of RM2.18/share, based on an unchanged 2016 PE of 25x but with a higher EPS of 8.7 sen.
It also raised 2016 earnings by about 11% to account for a higher CPO price assumption at
RM2,250/tonne.
However, it tweaked 2017 earnings downwards by 8% due to a revision in the forex rate from RM4.00 to RM3.85 to the US dollar.
At current prices, Jaya Tiasa’s implied enterprise value (EV)/planted ha is at RM20,000 versus Ta Ann’s RM26,000 – a discount of 21%. “At our target prices, Jaya Tiasa’s implied EV/planted ha is at RM27,000 versus Ta Ann’s RM32,000 – a discount of 15%,” it said.
The market EV/ha for brownfield land bank in Sabah and Sarawak is reportedly between RM62,000 and RM68,000.
It recently announced that it will discontinue planting on its remaining plantation land bank representing 0.4% or about 280ha of its estimated plantable area of 69,873ha, after December 2015.
“This means the end of the group’s oil palm capex cycle, which will be positive for cash flows. Apart from its previously neglected areas, the productive areas are sizeable at about 60,0000ha,” it said.
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