Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Timber sector
Maintain neutral: Japanese plywood importers, which had aggressively purchased panel products from Sarawak after the earthquake and tsunami in March, have temporarily halted new orders due to high inventories, The Star newspaper reported yesterday, citing the Sarawak timber Association (STA).
This confirms the International Tropical Timber Organisation's (ITTO) recent observation that there had been an easing of demand for plywood in Japan on the back of high inventories ' as we had noted last week.
We do not expect the situation to last for long as inventory rundown could happen just as quickly as the build-up of supply. In line with our view, STA panel products committee chairman Wong Kai Song said the market will be better towards the end of the year, and 2012 will see a stable market.
Buying by Japanese companies had slowed down in late May as plywood warehouses were full. Wong said the actual demand for the reconstruction of Sendai, one of the badly hit areas, was not as strong as anticipated due to the longer time taken to clear up the debris.
Japan's housing starts in June rose about 10% to 7,200 units compared with the normal monthly figures of 6,200 to 6,400 units. Wong said global plywood prices are still trading above US$600 (RM1,788) per cu m compared with US$400 per cu m in March and April this year.
He said with the supply of logs returning to normal, production had been boosted to an average of 70% now compared with up to 50% early this year when there was an acute shortage.
Sarawak Timber Industry Development Corp (STIDC) statistics show that Japan's plywood imports from Sarawak from April to June soared to 499,435 cu m worth over RM926 million, up from 296,162 cu m valued at RM475.7 million.
It is noteworthy that Sarawak's plywood exports to South Korea dropped to 39,143 cu m worth RM55 million during 2Q11, down from over 125,000 cu m at RM137.2 million in the previous corresponding period. This too was expected, given the imposition of anti-dumping duties ranging from 5% to 38% on Malaysian plywood exporters for three years starting from March.
During 1H11, Sarawak exported nearly 1.3 million cu m of panel products worth nearly RM2.1 billion compared with 1.46 million cu m at RM1.95 billion a year earlier.
We maintain our 'neutral' stance on the timber sector, with a 'buy' for Jaya Tiasa Holdings Bhd (fair value: RM8.51 per share) on the back of its oil palm division's rapid growth and more geographically diversified timber markets. Ta Ann Holdings Bhd, which is scheduled to announce its 2QFY11 results on Aug 22, continues to be a 'hold' (FV: RM5.83). ' AmResearch, Aug 15
This article appeared in The Edge Financial Daily, August 16, 2011.
Company Name: JAYA TIASA HOLDINGS BHD
| Research House: AMMB | Price Call: BUY | Target Price: 8.51 |
Timber sector
Maintain neutral: Japanese plywood importers, which had aggressively purchased panel products from Sarawak after the earthquake and tsunami in March, have temporarily halted new orders due to high inventories, The Star newspaper reported yesterday, citing the Sarawak timber Association (STA).
This confirms the International Tropical Timber Organisation's (ITTO) recent observation that there had been an easing of demand for plywood in Japan on the back of high inventories ' as we had noted last week.
We do not expect the situation to last for long as inventory rundown could happen just as quickly as the build-up of supply. In line with our view, STA panel products committee chairman Wong Kai Song said the market will be better towards the end of the year, and 2012 will see a stable market.
Buying by Japanese companies had slowed down in late May as plywood warehouses were full. Wong said the actual demand for the reconstruction of Sendai, one of the badly hit areas, was not as strong as anticipated due to the longer time taken to clear up the debris.
Japan's housing starts in June rose about 10% to 7,200 units compared with the normal monthly figures of 6,200 to 6,400 units. Wong said global plywood prices are still trading above US$600 (RM1,788) per cu m compared with US$400 per cu m in March and April this year.
He said with the supply of logs returning to normal, production had been boosted to an average of 70% now compared with up to 50% early this year when there was an acute shortage.
Sarawak Timber Industry Development Corp (STIDC) statistics show that Japan's plywood imports from Sarawak from April to June soared to 499,435 cu m worth over RM926 million, up from 296,162 cu m valued at RM475.7 million.
It is noteworthy that Sarawak's plywood exports to South Korea dropped to 39,143 cu m worth RM55 million during 2Q11, down from over 125,000 cu m at RM137.2 million in the previous corresponding period. This too was expected, given the imposition of anti-dumping duties ranging from 5% to 38% on Malaysian plywood exporters for three years starting from March.
During 1H11, Sarawak exported nearly 1.3 million cu m of panel products worth nearly RM2.1 billion compared with 1.46 million cu m at RM1.95 billion a year earlier.
We maintain our 'neutral' stance on the timber sector, with a 'buy' for Jaya Tiasa Holdings Bhd (fair value: RM8.51 per share) on the back of its oil palm division's rapid growth and more geographically diversified timber markets. Ta Ann Holdings Bhd, which is scheduled to announce its 2QFY11 results on Aug 22, continues to be a 'hold' (FV: RM5.83). ' AmResearch, Aug 15
This article appeared in The Edge Financial Daily, August 16, 2011.
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