MARKET DEVELOPMENT
Affin Research Retains Buy on WTK, Target Price RM1.76
Affin Research Retains Buy on WTK, Target Price RM1.76
01/08/2014 (The Star) - Affin Investment Research is maintaining its Buy recommendation for WTK Holdings Bhd at RM1.38 with a target price of RM1.76.
It said on Thursday the plantations-timber based group would benefit from a favourable rise in timber prices as its bottom-line still is largely driven by its timber operations.
“At RM1.38 and trading at a FY15 price-to-earnings ratio PER of 8.5 times, the stock looks attractive next to historical four-year mean PER of 10 times.
“We value WTK based on an unchanged SOP-derived target price of RM1.76, based on a 10 times PER target on 2015E timber division’s earnings, book value for its forest and palm oil plantation,” it said.
Affin Research said the key downside risk to its view were a disruption in harvesting of logs due to extreme bad weather; sharp drop in timber product prices; and lower contribution from its manufacturing and trading division.
The research house pointed out WTK’s log production in the first half of 4014 (H1FY14) increased by 12% on-year In 1H14.
WTK’s log production came in at 232,795 cubic metres, 11.5% higher than H1FY13. Log production was lower in late 2013 until January 2014 due to the monsoon season that disrupts logging activities. However, production started to pick up from February 2014 onwards on better weather conditions.
Affin Research added WTK’s average monthly log production year-to-date was also higher at 38,799 cubic metres as compared to 34,802 cubic metres in H1FFY13 (2013 monthly average: 35,551 cubic metres). Given the high demand for round log and favourable log average selling prices, we believe WTK will try to continue to maximize their log production in H2FY14.
“For its palm oil plantation division, WTK has planted 11,300 ha as at end- December 2013 (accounting for 56.5% of its total plantable area) and the group plans to plant another 1,500 ha this year. WTK is expected to fully plant its palm oil plantation by 2018.
“We believe fresh fruit bunches (FFB) production will continue to grow strongly given: 1) the rising maturity of its palm oil plantations; and 2) young average age profile of four to five year old palm oil trees.
“In addition, with the construction of its first palm oil mill in H2,FY15, we opine the group’s palm oil segment should show some meaningful contribution to the Group’s earnings starting in 2016,” it said.
It said on Thursday the plantations-timber based group would benefit from a favourable rise in timber prices as its bottom-line still is largely driven by its timber operations.
“At RM1.38 and trading at a FY15 price-to-earnings ratio PER of 8.5 times, the stock looks attractive next to historical four-year mean PER of 10 times.
“We value WTK based on an unchanged SOP-derived target price of RM1.76, based on a 10 times PER target on 2015E timber division’s earnings, book value for its forest and palm oil plantation,” it said.
Affin Research said the key downside risk to its view were a disruption in harvesting of logs due to extreme bad weather; sharp drop in timber product prices; and lower contribution from its manufacturing and trading division.
The research house pointed out WTK’s log production in the first half of 4014 (H1FY14) increased by 12% on-year In 1H14.
WTK’s log production came in at 232,795 cubic metres, 11.5% higher than H1FY13. Log production was lower in late 2013 until January 2014 due to the monsoon season that disrupts logging activities. However, production started to pick up from February 2014 onwards on better weather conditions.
Affin Research added WTK’s average monthly log production year-to-date was also higher at 38,799 cubic metres as compared to 34,802 cubic metres in H1FFY13 (2013 monthly average: 35,551 cubic metres). Given the high demand for round log and favourable log average selling prices, we believe WTK will try to continue to maximize their log production in H2FY14.
“For its palm oil plantation division, WTK has planted 11,300 ha as at end- December 2013 (accounting for 56.5% of its total plantable area) and the group plans to plant another 1,500 ha this year. WTK is expected to fully plant its palm oil plantation by 2018.
“We believe fresh fruit bunches (FFB) production will continue to grow strongly given: 1) the rising maturity of its palm oil plantations; and 2) young average age profile of four to five year old palm oil trees.
“In addition, with the construction of its first palm oil mill in H2,FY15, we opine the group’s palm oil segment should show some meaningful contribution to the Group’s earnings starting in 2016,” it said.