MARKET DEVELOPMENT
Jaya Tiasa Sees Decline in Log Production on Bad Weather
Jaya Tiasa Sees Decline in Log Production on Bad Weather
08/11/2014 (Borneo Post) - Jaya Tiasa Holdings Bhd (Jaya Tiasa) experienced a 5.4 per cent year on year decline in log production in the third quarter 2014 (3Q14) on account of bad weather conditions slowing down harvesting process.
The research team at Affin Hwang Investment Bank Bhd (Affin Hwang Research) noted that the average monthly log production year to date is lower at 81,370 cubic metres as compared to 86,310 cubic metres in 9M13. Monthly average production last year was 88,539 cubic metres, it said.
“However, due to the tight global supply of logs after Myanmar’s ban, the average selling prices (ASPs) for Jaya Tiasa’s logs and plywood in 2Q14 increased by 10.7 per cent and 3.1 per cent respectively to RM696 per cubic metre and RM1,876 per cubic meter,” it said.
“This has helped to mitigate a larger drop in Jaya Tiasa’s timber division revenue contribution due to lower logs and plywood sales volume.”
Based on current log production and ASPs, Affin Hwang Research estimated Jaya Tiasa’s timber division will generate revenue of about RM165 million in 1QFY15.
“We opine the timber division’s revenue could be affected by the lower log production and a slowdown in demand for plywood but supported by the firm timber ASPs. As at June 2014, Jaya Tiasa’s total plantable area of 69,873 hectares was 94 per cent planted and the group is expected to fully plant its palm oil plantation by end-2015.
“Also, FY14 prime matured areas of 14,918ha (or 23 per cent of planted area) is expected to increase to 25,255ha in FY15 (37 per cent of planted area) and 37,419ha (55 per cent of planted area) in FY16.
“For 3Q14, Jaya Tiasa’s FFB and CPO production increased by 7.4 and 30.9 per cent yoy respectively to 251,375MT and 27,443MT. Based on current production and ASPs, we estimate that the palm oil division will generate higher revenue of about RM95m in 1QFY15.”
Looking at corporate updates, the commissioning of Jaya Tiasa’s third palm oil mill in Lassa Plantation, with a capacity of 120 metric tonnes hour, has been delayed to end of this month or December due to test run being done at the mill.
“We opine the completion of the palm oil mill should help Jaya Tiasa to cope with the increasing matured palm oil estates and trim transportation costs, but no significant impact to our forecasts in the near term,” Affin Hwang Research said.
The research firm went on to maintain its reduce rating on Jaya Tiasa with a target price of RM1.80 per share, as it believed the stock was overvalued and has already priced in the expected sharp earnings growth for the palm oil division.
The research team at Affin Hwang Investment Bank Bhd (Affin Hwang Research) noted that the average monthly log production year to date is lower at 81,370 cubic metres as compared to 86,310 cubic metres in 9M13. Monthly average production last year was 88,539 cubic metres, it said.
“However, due to the tight global supply of logs after Myanmar’s ban, the average selling prices (ASPs) for Jaya Tiasa’s logs and plywood in 2Q14 increased by 10.7 per cent and 3.1 per cent respectively to RM696 per cubic metre and RM1,876 per cubic meter,” it said.
“This has helped to mitigate a larger drop in Jaya Tiasa’s timber division revenue contribution due to lower logs and plywood sales volume.”
Based on current log production and ASPs, Affin Hwang Research estimated Jaya Tiasa’s timber division will generate revenue of about RM165 million in 1QFY15.
“We opine the timber division’s revenue could be affected by the lower log production and a slowdown in demand for plywood but supported by the firm timber ASPs. As at June 2014, Jaya Tiasa’s total plantable area of 69,873 hectares was 94 per cent planted and the group is expected to fully plant its palm oil plantation by end-2015.
“Also, FY14 prime matured areas of 14,918ha (or 23 per cent of planted area) is expected to increase to 25,255ha in FY15 (37 per cent of planted area) and 37,419ha (55 per cent of planted area) in FY16.
“For 3Q14, Jaya Tiasa’s FFB and CPO production increased by 7.4 and 30.9 per cent yoy respectively to 251,375MT and 27,443MT. Based on current production and ASPs, we estimate that the palm oil division will generate higher revenue of about RM95m in 1QFY15.”
Looking at corporate updates, the commissioning of Jaya Tiasa’s third palm oil mill in Lassa Plantation, with a capacity of 120 metric tonnes hour, has been delayed to end of this month or December due to test run being done at the mill.
“We opine the completion of the palm oil mill should help Jaya Tiasa to cope with the increasing matured palm oil estates and trim transportation costs, but no significant impact to our forecasts in the near term,” Affin Hwang Research said.
The research firm went on to maintain its reduce rating on Jaya Tiasa with a target price of RM1.80 per share, as it believed the stock was overvalued and has already priced in the expected sharp earnings growth for the palm oil division.