KUCHING: The uptick in timber prices as well as the depreciation of the ringgit against the US dollar will benefit timber manufacturers and exporters such as Sarawak-based WTK Holdings Bhd (WTK).
RHB Research Institute Sdn Bhd (RHB Research) in a report said the gradual uptrend for timber prices is poised to enhance the company’s future earnings.
Following a company’s visit, the research firm said the earnings prospects for WTK remains intact supported by steady demand for log and plywood for the Japanese housing market, improvement in Indian log orders and the impending rise in sales tax in Japan which could witness an acceleration in plywood demand before the implementation of tax in April.
Besides that, it noted the depreciation of the ringgit against the US dollar will make exporters’ goods in overseas much cheaper.
Thus, WTK as an exporter of timber and plywood to Japan will gain from higher volume of timber exports and subsequently contributing positively to the company’s financial results.
The research firm forecasted that for every 10 sen decline of the ringgit agains the US Dollar, WTK Holdings’ earnings will improve by 15 to 17 per cent. RHB Research said log and plywood prices are forecasted to trend upward for the next few months.
Meanwhile, the company in a filing to Bursa Malaysia last week said its net profit for the fourth quarter of financial year 2013 (4Q13) jumped 101 per cent year-on-year (y-o-y) to RM19.35 million.
As for financial year 2013 (FY13), the timber cum plantation company’s earnings increased 22 per cent y-o-y to RM54.38 million.
At the same time, the company’s turnover for FY13 declined seven per cent y-o-y to RM715 million but revenue for 4Q13 rose marginally 1.1 per cent y-o-y to RM198 million.
RHB Research said the income from its timber division grew eight per cent y-o-y due to higher selling prices of logs and plywood but offset by lower log and plywood sales volumes as a result of lower log production.
The research firm noted that the company’s pre-tax profit went up 13 per cent y-o-y due to higher margins in timber division as a result of higher selling prices and stronger margins due to change in product mix and effective cost management.
Going forward, RHB Research observed that the favourable timber prices could lend support to the company’s financial performance for the coming quarter.