KUCHING: Analysts are cautious over Jaya Tiasa Holdings Bhd’s (Jaya Tiasa) performance in coming quarters on the back of weak fresh fruit bunch (FFB) production and higher production costs seen in its third quarter of financial year 2015 (3QFY15).
Affin Hwang Investment Bank Bhd (AffinHwang Capital) said sequentially, Jaya Tiasa’s 3QFY15 revenue decreased by 15.7 per cent quarter on quarter (q-o-q) to RM243.1 million.
Its log, wood processing and palm oil divisions recorded weaker revenue of RM104.6 million (drop by 5.9 per cent q-o-q), RM92.4 million (3.9 per cent dip q-o-q) and RM45.8 million (43.5 drop per cent q-o-q) respectively.
“Its earnings before interest, tax, depreciation and amortisation (EBITDA) margins improved to 18.8 per cent against 10.6 per cent in 2QFY15 due to better margins from the log and wood processing divisions,” AffinHwang Capital observed in a note yesterday.
To note, Jaya Tiasa reported core net profit of RM5.5 million in 3QFY15 versus a core net loss of RM3.7 million in 2QFY15.
For the cumulative in the months of FY15 (9MFY15), Jaya Tiasa’s core net profit fell by 47.8 per cent y-o-y to RM28.4 million, despite revenue growing by four per cent y-o0y to RM793.4 million.
“The 9MFY15 results were below our and street expectations, accounting for only 56 per cent of our and consensus FY15E earnings.
The variance was attributable to the lower-than-expected EBITDA margin of 18.1 per cent, mainly due to lower-than-expected FFB production and higher production costs.”
RHB Research Institute Sdn Bhd (RHB Research) attributed the weakness in the plantation division to lower FFB sales volume of minus 20 per cent and lower FFB selling prices which dropped seven per cent.
“This was offset by better profits achieved at the timber division on the back of an eight per cent increase in log selling prices, a 12 per cent increase in log sales volume and a 33 per cent increase in veneer sales volume,” it added in a separate report.
“Although log sales volume rose during 9MFY15 from inventory sales, log production fell eight per cent y-o-y in 9MFY15.”
This, RHB Research said, was due to some issues facing Jaya Tiasa from November 2014 to March this year when productivity of both logs and FFB declined due to the resignation of one of its subcontractors who managed 90 per cent of its palm oil estates and 60 per cent of its timber concessions.
This issue has since been resolved from April, as the company has appointed new subcontractors and/or taken over the operations itself.
The firm cut its FY15-16 earnings forecasts by seven to eight per cent to take into account a reduction in our volume assumptions for log and FFB production, and higher unit costs for the plantation division.
“Post-earnings revision, our sum of parts-based target price is trimmed to RM1.40.”
AffinHwang Capital also cut its FY15-17E earnings per share forecasts by 11 to 29 per cent, based on assumptions of a lower FFB yield of 12 to 16 per cent and higher FFB costs of RM320 to RM350 per metric tonne.
“In tandem with our earnings reductions, we lower our target price to RM1.31.”