JTIASA (4383) : Jaya Tiasa Holdings - A strong kickoff to FY15
Target RM2.15 (Target: HOLD)
Jaya Tiasa has just posted its best quarterly earnings since 4QFY6/12. Its 1QFY15 core net profit was above our expectation, as a result of stronger-than-expected logging earnings, but was slightly below consensus forecast. It made up 37% of our and 22% of consensus full-year estimates. No dividend was declared, as expected. We raise our FY15-17 EPS by 8-25% to account for stronger logging profits. This lifts our SOP target price to RM2.15. The stock remains a Hold due to unexciting near-term earnings outlook. We prefer First Resources for exposure to the plantations sector.
Key results highlights
1QFY6/15 core net profit rose 17% yoy to RM24m. The better performance was due to stronger log and palm oil earnings. Log profit before tax (PBT) jumped 78% yoy to RM28m, which the group attributed to higher log selling prices (+6% yoy). Oil palm PBT surged 48% yoy to RM14m on the back of stronger FFB production (+7% yoy) which lowered its unit cost of production. Although Wood processing PBT plunged 82% yoy to RM2m, it was a noticeable improvement from 4Q14, which registered a loss of RM3m.
Log production cost unexpectedly fell
We are surprised by the surge in Jaya Tiasa’s logging profit in 1QFY15. The RM5.6m increase in its logging revenue from year-ago level was less than half of the RM12.5m increase in its logging PBT. On top of that, the division’s PBT margin expanded 14% pts yoy though log selling prices rose only 6% yoy. We suspect its cost of log production has fallen during the quarter. We lower our log production cost assumption for 1Q but keep our initial projections for the rest of the year intact pending clarification with management. Every 1% drop in log production cost will boost our FY15 EPS forecast by 2.1%.
Expect weaker timber earnings going forward
Jaya Tiasa’s timber earnings may weaken in the next few quarters as a result of seasonal decline in log production and softening plywood prices. Based on the latest trade statistics, prices of Malaysian plywood in Japan averaged at US$579 per m³ in Sep 14, 3% lower than the average price achieved in 3Q14. We expect plywood prices to persist at Sep level in 4Q given the subdued outlook on Japan’s economy and its demand for tropical plywood.
Source: CIMB Daybreak - 28 November 2014
Target RM2.15 (Target: HOLD)
Jaya Tiasa has just posted its best quarterly earnings since 4QFY6/12. Its 1QFY15 core net profit was above our expectation, as a result of stronger-than-expected logging earnings, but was slightly below consensus forecast. It made up 37% of our and 22% of consensus full-year estimates. No dividend was declared, as expected. We raise our FY15-17 EPS by 8-25% to account for stronger logging profits. This lifts our SOP target price to RM2.15. The stock remains a Hold due to unexciting near-term earnings outlook. We prefer First Resources for exposure to the plantations sector.
Key results highlights
1QFY6/15 core net profit rose 17% yoy to RM24m. The better performance was due to stronger log and palm oil earnings. Log profit before tax (PBT) jumped 78% yoy to RM28m, which the group attributed to higher log selling prices (+6% yoy). Oil palm PBT surged 48% yoy to RM14m on the back of stronger FFB production (+7% yoy) which lowered its unit cost of production. Although Wood processing PBT plunged 82% yoy to RM2m, it was a noticeable improvement from 4Q14, which registered a loss of RM3m.
Log production cost unexpectedly fell
We are surprised by the surge in Jaya Tiasa’s logging profit in 1QFY15. The RM5.6m increase in its logging revenue from year-ago level was less than half of the RM12.5m increase in its logging PBT. On top of that, the division’s PBT margin expanded 14% pts yoy though log selling prices rose only 6% yoy. We suspect its cost of log production has fallen during the quarter. We lower our log production cost assumption for 1Q but keep our initial projections for the rest of the year intact pending clarification with management. Every 1% drop in log production cost will boost our FY15 EPS forecast by 2.1%.
Expect weaker timber earnings going forward
Jaya Tiasa’s timber earnings may weaken in the next few quarters as a result of seasonal decline in log production and softening plywood prices. Based on the latest trade statistics, prices of Malaysian plywood in Japan averaged at US$579 per m³ in Sep 14, 3% lower than the average price achieved in 3Q14. We expect plywood prices to persist at Sep level in 4Q given the subdued outlook on Japan’s economy and its demand for tropical plywood.
Source: CIMB Daybreak - 28 November 2014
