KUALA LUMPUR: AmInvestment is retaining its Buy call for Jaya Tiasa with an unchanged fair value of RM2.18 a share, based on an FY16F PE of 25 times.
The research house said on Friday this was three notches below its10-year forward PE of 28 times.
It said the plantations and timber company posted a 2QFY16 core net profit of RM29mil (-6% QoQ, and vs. -RM3.7mil a year earlier) – bringing the 1HFY16 core earnings to RM59mil (+159% YoY).
“This beats our expectations, with the core profit accounting for 60% of our full-year forecast, but was within consensus estimate at 51.
“While the timber division outperformed, the palm oil division incurred a 2QFY16 pre-tax loss of RM6.9mil (vs. a profit of RM2.4mil in 1QFY16), leading to a loss of RM4.5mil for 1HFY16,” it said.
AmInvestment said Jaya Tiasa is entering the traditionally low harvest season in 1QCY before production picks up and peaking in 3QCY.
For January 2016, FFB production amounted to only 53,000 tonnes. The research house continues to expect Jaya Tiasa to be able to harvest at an average of 61,000 tonnes per month for the rest of FY16F, to achieve our estimate of 900,000 tonnes (+22% YoY @14.7 tonnes yield) for the full year.
The FFB production’s decline in the low harvest season will be mitigated by CPO prices that have trended above RM2,500 a tonne recently.
For 1HFY16, Jaya Tiasa’s management attributed the improvement in earnings to a 23% and 51% increase in CPO and veneer sales volume, respectively. Higher average selling prices of log and plywood of 25% and 17%, respectively, also boosted performance.
“Management cautioned that the average selling prices for wood products are expected to be under pressure in the coming quarters as global demand has slipped in tandem with weaker economic conditions.
“However, the favourable exchange rate would help mitigate the adverse impact on the timber segment. We reiterate that it continues to be a cheap entry into the oil palm sector. It is an FFB recovery play, aided by the weak ringgit,” said AmInvestment.
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