Affin downgrades Jaya Tiasa to 'add'

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: AFFIN

Price Call: BUY

Target Price: 2.78

KUALA LUMPUR: Affin Investment Bank downgraded Jaya Tiasa Holdings Bhd to 'add' from 'buy' and cut its target price to RM2.78 per share from RM3.07, after the timber and plantation firm's earnings missed market expectations.

The research house trimmed its net profit forecast for Jaya Tiasa for the financial year ending June 30, 2013, by 6 per cent, citing lower plywood output and higher production costs.

Nonetheless, Affin said it still prefers Jaya Tiasa for exposure to the timber sector, mainly due to the company's less reliance on Japan for a recovery and strong exposure to palm oil production.

By 10:15am (0215 GMT), the counter rose 0.79 per cent to RM2.54, while the broader index dropped 0.02 per cent. -- Reuters

Jaya Tiasa ' Scaling to new heights

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 9.60

Jaya Tiasa ' Scaling to new heights                                                                             Outperform

Visit Note

-          Log prices achieved by Jaya Tiasa in 3QFY04/12 were surprisingly lower qoq at about US$170/m3 (2Q:US$220/m3). Management said this was mainly due to the deterioration of the quality of its logs given delays in bringing down the logs to the port.

-          We roll forward our valuation base to FY06/13 (from CY12 previously) with unchanged target PER of 8x for the timber division and 15x for the plantation division. Fair value raised to RM9.60.

Source: RHB Reserach - 4 April 2012

Jaya Tiasa Holdings - Entering into a new plantation era; bonus bonanza HOLD

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: AMMB

Price Call: HOLD

Target Price: 8.24

- We downgrade Jaya Tiasa Holdings Bhd to HOLD, with  a slightly downward revised fair value ofRM8.24/share (vs. RM8.37/share previously), based a PE of 13x its annualised FY12Fcore EPS of 63.4 sen (vs. basic EPS of 64.4 sen previously).

- The stock has reached our previous fair value since lastweek after it announced a 2-for-1 bonus issue (est. total of 645mil bonusshares) and a 15% placement of new shares (est. 42mil shares that may raiseRM300mil, prior to bonus issue ' which will partly lower borrowings and keepgearing in check).

- Its proposed dividend of one treasury share for every 20 sharesheld will go ex- on 6 April 2012. We believe Jaya Tiasa's latest proposals areaggressive measures to spur trading liquidity of its shares and would go a longway towards enhancing the attractiveness of the stock.

- We welcome the proposals in the belief that management is signallingstrong intent in fiscal prudence (though gearing remains manageable), whilepreparing the group for its next phase of mid-cycle growth in the oil palmsector, with potential landbank acquisition ahead.   

- Our downward adjustment to FY12F earnings follow theresult for the three months to 31 January 2012, which came in slightly belowexpectations due to lower CPO prices (QoQ and YoY), and a decline in log pricesgiven the significant slowdown of exports to India in view of the weakeningRupee during the period.

- Its net profit of RM143mil (+54% YoY) for the nine monthsto 31 January accounted for 83% of our previous annualised FY12F net profit ofRM172mil. However, excluding an exceptional gain of RM27.6mil on the disposalof a subsidiary, the core net profit of RM115mil (+24.4% YoY) would bring that downto 67% (vs. 70% now given our revised annualised earnings to RM164mil).

- Log prices have improved in view of the strengtheningRupee in the recent months. Sarawak Timber Association this week said new ordersfrom Japan's plywood importers had continued to flow in since late last yearand that  Sarawak manufacturers wouldbenefit from anticipated stronger demand from Japan at the start of spring nextmonth.

- The oil palm division, which accounted for over 60% of itslatest quarterly earnings, is expected to continue to perform significantlybetter than the timber division given the current strong CPO prices. 

- Our target PE of 13x is conservative vis-''-vis its forwardPE mean of 20x, and well within 1+SD and -1SD of 9x and 31x, respectively.  

Source: AmeSecurities

Jaya Tiasa ' 9MFY04/12 core net profit rose by 24% YoY

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 8.92

Jaya Tiasa ' 9MFY04/12 core net profit rose by 24% YoY                                             Outperform

Results Note

-          9MFY04/12 core net profit was below expectations. Key variances are mainly due to lower-than-expected FFB sales volume and lower average selling prices for log in 3QFY04/12.

-          We raised our target PER for Jaya Tiasa's plantation division to 15x (from 13x), in line with the recent upgrade in our target PER for the sector. We also remove the 10% discount in our SOP fair value given the proposed corporate exercises will improve the stock's trading liquidity. Post earnings revision, fair value for Jaya Tiasa is revised to RM8.92 (from RM7.80).
Source: RHB Research 23 March 2012

Unleashing oil palm's potential

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: AMMB

Price Call: BUY

Target Price: 8.37

Strong Earnings Growth Driven By Plantation

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 7.28

RHB Research has Outperform on Jaya Tiasa, Ta Ann

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 6.71

Stock Name: TAANN
Company Name: TA ANN HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 6.49

KUALA LUMPUR (Dec 6): RHB Research Institute said the build-up in plywood inventory in Japan is easing with low arrivals of import since September.

It said on Tuesday that generally, plywood prices are firming, although demand is not strong enough to push up prices up very much.

For log, prices have remained firm due to robust demand from India amid seasonal low log production period in Sarawak currently.

'We maintain our Neutral call on the sector as we remain cautious that the recovery in Japan housing starts could stall due to a protracted slowdown in the global economy.

'Nevertheless we still like Jaya Tiasa (Outperform, FV RM6.71) and Ta Ann (Outperform, FV RM6.49) as there will be significant boost to their earnings from PLANTATION [] going forward due to rising fresh fruit bunches production volume and favourable crude palm oil prices,' it said.

Timber: Japan plywood imports may have peaked

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: AMMB

Price Call: BUY

Target Price: 8.51

Timber sector
Maintain neutral: Japan's plywood imports are expected to remain high in expectation of strong domestic demand when the reconstruction of the disaster-hit areas moves into full swing, said the International Timber Organisation (ITTO), citing the Japan Lumber Report (JLR). However, the JLR is of the view that plywood imports may have passed their peak, as manufacturers not affected by the March disaster continue to maintain high levels of production, while some of those affected have resumed production.

The affected manufacturers of softwood plywood said it will take a long time for them to return to pre-earthquake production levels. The JLR said the supply of domestic plywood may temporarily exceed demand in the short term, given the current high inventories.

The bulk of domestic plywood production involves the processing of softwood, while tropical hardwood-based plywood is mostly imported, including from Sarawak. Tropical plywood is not only used in houses, but also general construction purposes due to its durability and tough features.

The ITTO said plywood demand in the three prefectures most affected by the disaster'' has been driven by emergency repairs and the 'plywood business is booming' for the first two weeks of this month. Sales have been slow in other areas.

The ITTO said plywood imports in June grew to 384,000 cu m (up 38% year-on-year versus +63% y-o-y in May), but expects it to decline after this month. It said domestic inventories at end-June were estimated at 153,000 cu m, a slight increase over May. We believe the bulk of the inventories comprise softwood plywood.

The latest reports are still consistent with our view that the high inventory of plywood would be temporary, while a steady and constant demand for imported plywood, including Sarawak's hardwood plywood, would resume once reconstruction begins in earnest ' expected by year-end. Notably, the JLR reported that local associations have submitted a proposal to the government on the utilisation of wood debris. It is estimated about 65% of the debris is wood, which can be used to produce wood-based panels. According to the ITTO, wood waste and logs soaked in seawater were used to produce particle-board when Hokkaido suffered damage from a typhoon three years ago. We do not believe this would have a significant impact on the import of panel products, particularly tropical plywood.

We maintain 'neutral' on the timber sector. Our top pick continues to be Jaya Tiasa Holdings Bhd ('buy', fair value: RM8.51 per share) backed by its oil palm division's rapid growth. This follows a much more aggressive plantation acquisition strategy over the years, compared with Ta Ann Holdings Bhd's.

Ta Ann ('hold' FV: RM5.83) continues to be one of the beneficiaries of the'' rebuilding in Japan. It exports over 90% of its plywood, including the premium Tasmania floor base products, to Japan. However, the full impact may only be felt from FY12F onwards, in tandem with the rebuilding in Japan. Key catalysts include: (i) Japan rebuilding picks up momentum; (ii) even more funds for reconstruction; and (iii) global economic recovery resuming long-term trend pace.

The main risks include: (i) a global double-dip recession; (ii) lower-than-expected crude palm oil prices; and (iii) rebuilding in Japan stalls due to further political/budgetary issues, and/or further deterioration of the Fukushima nuclear plant crisis. ' AmResearch, Aug 17


This article appeared in The Edge Financial Daily, August 18, 2011.

Timber: Japanese plywood importers halt new orders

Stock Name: JTIASA
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.

AmResearch maintains Buy on Jaya Tiasa

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: AMMB

Price Call: BUY

Target Price: 8.51

KUALA LUMPUR: AmResearch has maintained its BUY call on JAYA TIASA HOLDINGS BHD [], with an unchanged fair value of RM8.51 based on a PE of 15 times FY12F EPS of 56.7 sen per share.

It said in a note July 28 that Jaya Tiasa recently announced a better-than-expected net profit of RM147 million for FY11 (+503% versus FY10), which was 16% and 12% above our and consensus estimates, respectively.

'Post-FY11 results, we had upgraded the stock to a BUY (from hold previously). The oil palm division, whose pre-tax profit surged 460% to RM105 million in FY11, will continue to be the star performer in the next two to three years.

'We expect FFB production to grow significantly by 45% to 520,000 tonnes in FY12F and by another 50% to 750,000 tonnes in FY13F,' it said.

AmResearch said Jaya Tiasa's mature hectarage was expected to rise 50% to over 37,000ha in FY12F and by another 30% to about 50,000ha by FY13F, after adding 70% to 25,058ha as at end-FY11.

The research house said its CPO assumption for each of FY12F-FY14F was RM3,300/tonne.

Apart from sustained demand from India for its logs, rising demand for plywood products from Japan for its reCONSTRUCTION [] efforts will also lend support to the company's performance, it said.

'Jaya Tiasa's well diversified markets put it in a good position to benefit from the strong timber market.

'Our fair PE of 15 times is well within the stock's historical five-year forward PE of between 6x and 36x, and below the average of 16 times. Jaya Tiasa is now trading at an attractive PE of 12 times,' it said.

Timber in a sweet spot

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 10.75

Timber sector
Maintain overweight: The outlook for Japan housing starts remains positive, although disruptions in the wake of the recent earthquake and tsunami will likely weigh on housing starts in the near term. According to Sekisui House Ltd, Japan's largest home builder, reconstruction-related housing demand is likely to come in strong to help to push Japan's annual housing starts above 900,000 units over the next two to three years, compared with 813,143 units in 2010.
While we do expect to see some easing of log prices in the near term, this is likely to have more to do with seasonal patterns as production should start to normalise when weather conditions improve. We do not expect log prices to come off very substantially from the current levels given that demand from India and China remains robust, while overall log supply can only increase by no more than 10% year-on-year (taking 2008 and 2009 production levels as well as the latest production quota as a guide).

According to the latest Japan Lumber report, plywood prices have remained firm so far in May and June at US$675 (RM2,031.75) to US$850 per cu m after the spike in March, which is in line with our expectations. We expect plywood prices will remain stable at this level for the next few months, before they start to rise again when reconstruction starts to gain pace.

We are positive on Ta Ann Holdings Bhd and Jaya Tiasa Holdings Bhd, as both companies have significant oil palm plantations similar to mid-sized plantation companies. Fresh fruit bunches (FFB) production for both companies is set to rise significantly over the next few years due to increasing mature hectarage.

The risks include: (i) lower than expected improvement in Japan's housing starts; and (ii) price discounting by neighbouring countries with lower cost of production, resulting in lower exports from Malaysia to its major export markets.

We maintain our 'overweight' call on the timber sector given robust near-term earnings growth for the timber division due to: (i) strong log prices owing to huge demand from India and China; and (ii) strong plywood prices due to increased demand from Japan for reconstruction activities. There will also be a significant boost to Jaya Tiasa and Ta Ann's earnings from the plantation division going forward due to increasing FFB production. ' RHB Research, July 6


This article appeared in The Edge Financial Daily, July 7, 2011.

JTIASA - It's a sellers' market in timber

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Research House: RHB

Timber sector
Maintain overweight: Sentiment for the timber sector has improved considerably since the earthquake and tsunami in Japan on March 11. The current situation has a more significant impact on the timber market than the 1995 Kobe earthquake. In 1995, inventory was high, the log supply was consistent, Indonesia was still a fairly dominant supplier to Japan and Japan still had ample domestic production capacity.

We believe tropical log prices will remain firm at above US$200 (RM606) per cu m (currently estimated at US$245 per cu m), even when log production starts to pick up, largely thanks to the robust demand from India and China. Due to the current favourable outlook for plywood demand and prices, there is a possibility that the Sarawak Forestry Department may not extend the 50% log export quota once it expires in June.

We believe it is a sellers' market now for plywood, given the anticipated increase in demand from Japan, low inventory level, limited increase in supply, and disruption in Japan's domestic plywood production. In our view, the favourable outlook for plywood will finally see plywood sales contribute more positively to timber players' earnings, unlike previous years when they incurred losses or only made a small profit from their plywood divisions.

We have revised our FY11/13 earnings forecasts for the timber companies under our coverage, having updated for: (i) higher log prices; (ii) higher plywood prices and utilisation rate; and (iii) higher cost of production for logs and plywood.

The risks include: (i) lower than expected improvement in Japan's housing starts; and (ii) price discounting from neighbouring countries with lower cost of production, resulting in lower exports from Malaysia to its major export markets.

We downgrade our call on WTK Holdings Bhd to 'market perform' (from 'outperform' previously) due to the limited upside to our fair value. WTK's share price has rallied by 65% since the Japan earthquake.

Top picks are Jaya Tiasa Holdings Bhd and Ta Ann Holdings Bhd. All in all, we reiterate our 'overweight' call on the timber sector. Top picks are Jaya Tiasa ('outperform'; fair value: RM7.84) and Ta Ann ('outperform'; FV: RM7.99) as there will be a significant boost to their earnings from the plantation division going forward due to increasing fresh fruit bunches production, apart from strong earnings contributions from the timber division. ' RHB Research, April 5


This article appeared in The Edge Financial Daily, April 6, 2011.

JTIASA - Timber-related stocks extend losses

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Research House: AMMB

KUALA LUMPUR: Timber-related stocks extended their losses on Thursday, March 31 as stretched valuations and questions over the ability of the companies to meet the expected demand caused the recent rally in the share prices to halt.

At 10.35am, Subur Tiasa fell 14 sen to RM3.70, Jaya Tiasa and Ta Ann lost 10 sen each to RM6.24 and RM6.66, while WTK edged down one sen to RM1.98.

AmResearch Sdn Bhd had yesterday downgraded both JAYA TIASA HOLDINGS BHD [] and TA ANN HOLDINGS BHD [] to a Hold from Buy previously, but with raised fair values to RM7.11 (RM6 previously) and RM7 (RM6.30 previously), respectively.

The research said it now had a neutral stance on the sector, given the recent surge in their share prices, adding that the steep run-up in their share prices ' following its earlier upgrade on Ta Ann and its earnings ' had stretched valuations.

'Any further upgrade appears somewhat unlikely as the availability of logs supply may not keep up with the anticipated increase in demand stemming from the Japan disaster,' it said in a note March 30.

JTIASA - Timber-related stocks extend rally

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Research House: RHB

KUALA LUMPUR: Timber-related stocks continued their rally on Tuesday, March 29 and were among the top gainers in early trade on expectations of a rise in demand for timber-products.

At 9.35am, Subur Tiasa jumped 46 sen to RM3.90, Jaya Tiasa up 29 sen to RM6.45, Ta Ann 20 sen to RM6.69, WTK 10 sen to RM1.94 while Leweko edged up one sen to 22 sen.

Meanwhile, RHB Research in a note March 29 raised its fair value for Jaya Tiasa to RM7.20 from RM6.30 after the company posted RM92.4 million for 9MFY04/11.

The research house said the result was above its expectations.

'We believe key variances were higher log prices (+23% y-o-y) for 9M (versus our +18% projection for FY04/11) and higher FFB production growth (of 81% y-o-y for 9M versus our +71% projection for FY04/11).

'Due to the favourable outlook for the timber sector after the Japan earthquake, we upgrade our target PER for the timber division to 14 times CY11 earnings. In addition, despite the recent downgrade in our PLANTATION [] sector valuation targets, we are keeping our target PER of 13x CY11 earnings for the plantation division due to the significant growth in FFB production volume projected over the next few years,' it said.

JTIASA - Jtiasa to benefit from Japan's rebuilding

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Research House: AMMB

Ta Ann Holdings Bhd
(March 15, RM4.87)
Upgrade to buy with revised fair value RM6.30 (from RM5.61): We are upgrading Ta Ann Holdings Bhd to a 'buy' from 'hold' previously, with a raised fair value to RM6.30 (from RM5.61 previously) pegging an upward revised FY11F earnings per share of 42 sen to an unchanged fair price-earnings ratio of 15 times . We maintain our 'buy' call on Jaya Tiasa Holdings Bhd, with a fair value of RM6, premised on an unchanged fair PER of 15 times against its FY11F EPS of 40 sen per share.

The upgrade is premised on the anticipated surge in demand, and more importantly higher prices, for plywood in the wake of Japan's worst earthquake, which devastated a large swath of land along the country's northeastern coastline. Ta Ann exports over 90% of its plywood products to Japan. Consequentially, log prices are also expected to strengthen.

Many of the country's plywood and wood-based mills are located in the cities of Sendai and Ishinomaki in the Miyagi Prefecture, which was one of the worst hit areas by the ensuing tsunamis that reached heights of up to 10m. It is believed that many of the plywood facilities were destroyed. This is apart from the thousands of buildings, including homes, which were wiped out.

According to the Japan External Trade Organisation (TETO), Miyagi is home to numerous saw mills and chip plants that use the prefecture's inland timber resources. According to TETO, 'the Ishinomaki region in particular boasts of the largest agglomeration of plywood manufacturing plants in Japan, as well as paper factories based in the vicinity of the Port of Ishinomaki, an important transport hub, while the Iwanuma region is the home of numerous paper factories, and so on'. Judging by the extent of the damage, no industry, including Japan's timber enterprises, has escaped unscathed.

In our alert last Friday in the immediate aftermath of the disaster, we reported that timber players are expecting a probable steady rise in demand of wood. Given the massive scale of the devastation, we now believe demand is bound to pick up, though not in the immediate term, given the uphill task in the clean-up.

We raise Ta Ann's FY11F net profit by 11% to RM107 million from RM96 million previously, while tweaking FY12F's earnings by 4% to RM127 million from RM122 million previously. The revisions translate into EPS of 42 and 49 sen for FY11F and FY12F respectively. On the downside, Ta Ann is still hampered by operating losses at its Tasmania veneer manufacturing facilities.

We maintain our 'buy' rating on Jaya Tiasa with an unchanged fair value of RM6. Though it will most certainly benefit as well if demand and prices were to pick up, its exposure to Japan accounts for less than 10% of both its total logs and plywood exports. ' AmResearch, March 15


This article appeared in The Edge Financial Daily, March 16, 2011.

JTIASA - Oil palm deal benefits Jasa Tiasa and Ta Ann

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Research House: AMMB

Timber sector
Initiate coverage with overweight recommendation: We initiate coverage on the timber sector with an 'overweight' call, recommending a 'buy' on Jaya Tiasa Holdings Bhd and a 'hold' on Ta Ann Holdings Bhd with fair values of RM6 and RM5.61 respectively, based on a PER of 15 times.
Our recommendations are grounded on three key points:

1.'' ''Timber price recovery.
The timber industry has recovered from the ebbs of the recent global economic crisis. Plywood prices fell to a low of around US$350 (RM1,225)/cu m in 2009 but have rebounded to a high of US$485/cu m in recent weeks. Additionally, Meranti regular logs, which plunged to a low of US$120-U$130/cu m then, have in recent weeks traded at a high of US$290/cu m.

2.'' ''Structural transformation.
The two companies are reaping the fruit of their venture into oil palm about a decade ago. CPO is now trading at between RM3,900 and RM4,000/tonne against an average of RM2,700 per tonne last year. Their rapid growth in oil palm has simply become too significant to ignore.

3.'' ''Potential reclassification.
For the two companies, a reclassification from the industrial products sector to plantations appears to be inevitable ' perhaps within the next three years. This will increase their profile among investors.

Our stance mainly stems from the high-octane growth in their oil palm business. As of FY10, the oil palm division accounted for about 45% of Jaya Tiasa's pre-tax profit against only 6% in FY06 while as of'' FY09, oil palm earnings of RM37 million represented 40% of Ta Ann's pre-tax profit compared with a mere 1.4% in FY06.

Jaya Tiasa and Ta Ann's fair values are based on a PER of 15 times their FY11F earnings per share of 40 sen and 37.4 sen, respectively. To account for their oil palm segment's growing prominence, with timber to boot, the fair PER is at the high end of the PER range of the small cap plantation companies under our coverage but just a notch below IJM Plantations Bhd's fair PER of 16 times.

Jaya Tiasa and Ta Ann's mature oil palm areas are comparable to that of IJM Plantations'. As at FY10, Jaya Tiasa and Ta Ann have total planted areas of 50,424ha and an estimated 27,500ha, respectively, against IJM Plantations' 30,528ha. Jaya Tiasa and Ta Ann's mature hectarages are expected to rise to 25,000ha and 20,000ha, respectively, in FY11F.

The risks to our projections include: (i) A significant decline in CPO prices: (ii) A sharper than expected appreciation of the ringgit; and (iii) Rising logistics and transport costs due to the withdrawal of fuel subsidies and rising diesel prices in the local market. ' AmResearch, Feb 14


This article appeared in The Edge Financial Daily, February 16, 2011.

JTIASA - AmResearch initiates coverage on timber with overweight stance

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Research House: AMMB

KUALA LUMPUR: AmResearch initiates coverage on the timber sector with an OVERWEIGHT stance, recommending a BUY on JAYA TIASA HOLDINGS BHD [] and a HOLD on TA ANN HOLDINGS BHD [] with fair values of RM6.00/share and RM5.61/share, respectively, based on a PE of 15x.

It said on Monday, Feb 14 its recommendations are based on the timber price recovery; structural transformation, and potential reclassification and its stance is underpinned by the 'high-octane growth' in their oil palm business.

As of FY10, the oil palm division accounted for about 45% of Jaya Tiasa's pre-tax profit versus only 6% in FY06, while as of its FY09, oil palm earnings of RM37mil represented 40% of Ta Ann's pre-tax profit compared with a mere 1.4% in FY06. Jaya Tiasa's and Ta Ann's fair values are based on a PE of 15x their FY11F EPS of 40 sen and 37.4 sen, respectively.

To account for their oil palm segment's growing prominence, with timber to boot, the fair PE is at the high end of the PE range of the small capitalisation PLANTATION [] companies under our coverage but just a notch below IJM PLANTATIONS BHD []'s (IJMP) fair PE of 16x.

JTIASA - Improving timber prices, rising FFB output to drive Jaya Tiasa's earnings

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Research House: RHB

Jaya Tiasa Holdings Bhd
(Feb 7, RM5.00)
Maintain outperform at RM4.88 with fair value raised to RM6.30 (from RM5.78): A pickup in demand for tropical logs and the tight supply situation in Sarawak drove up average log selling prices for Jaya Tiasa from US$172/ cubic metre (m3) in May 2010 to US$221/m3 in Dec 2010. Jaya Tiasa believes that the current strong log prices will hold at least for another six months, even after log production in Sarawak starts to normalise as the seasonal wet weather conditions end.

Average selling prices achieved by Jaya Tiasa for its plywood division are lower compared with its peers (such as Ta Ann and WTK) due to the difference in product mix. Hence, despite rising plywood prices reported by the industry, average selling prices achieved by Jaya Tiasa have fluctuated from month to month.

Jaya Tiasa said it plans to increase its veneer sales to about 25%-30% of its production due to the better margin achieved compared with plywood. We are slightly sceptical on whether this could be achieved as we believe the current high selling price for veneer is only temporary due to log shortage problem in plywood mills in other countries.

Jaya Tiasa said that its fresh fruit bunch (FFB) production forecasts are conservative and that the forecasts could be as much as 25% lower than the actual production numbers. This is mainly due to its treatment of mature areas, where areas that mature during a particular financial year will only be reflected in the next financial year forecast.

Risks include timber and crude palm oil prices falling; a slower-than-expected recovery in the global economy; and significant increase in crude oil-related glue and logistics costs.

We raised our FY04/11-13 net profit by 7.7%-11.3%, after adjusting for: 1) Higher log prices; and 2) Lower plywood prices.

We raised our target price for Jaya Tiasa to RM6.30 (from RM5.78 previously) based on unchanged target PER of 12 times CY11 earnings for the timber division and 13x CY11 earnings for the plantation division. We like Jaya Tiasa as we expect strong earnings growth going forward due to the sharp increase in FFB production owing to increasing mature hectarage.

There is going to be a significant change to Jaya Tiasa's earnings profile, where its plantation division will contribute about 70%-75% of earnings from FY04/11 onwards. Maintain outperform. ' RHB Research, Feb 7


This article appeared in The Edge Financial Daily, February 8, 2011.

JTIASA - RHB Research maintains overweight on timber sector

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute is maintaining its Overweight call on the timber sector given the promising outlook of firm average selling prices for plywood and logs.

The research house said on Wednesday, Dec 29 timber companies which have significant oil palm PLANTATION [] such as Jaya Tiasa and Ta Ann are also set to benefit from rising crude palm oil prices.

'Hence, our top picks are Jaya Tiasa (OP, FV = RM5.78) and Ta Ann (OP, FV = RM5.92),' it said.

RHB Research said the latest October 2010 Japan housing starts growth of 6.4% on-year'' was the fifth consecutive on-year rise following the previous 17.7% and 20.4% on-year growth recorded in September and August respectively. This was supported by the 3.4% on-year increase in number of building permits issued in Oct 2010.

'Going into 2011, we believe the tight log supply situation in Sarawak is likely to continue for a few more months due to seasonal factors, before log production starts to normalise.

'Nevertheless, we believe tropical log prices would remain firm even when log production starts to pick up, thanks largely to the huge and robust demand from India and China,' it said.