AmResearch upgraded its call on Jaya Tiasa to ‘buy’ on the back of improved FFB yields over the last four months and strong timber prices in the 1QFY16. — Reuters photo
KUCHING: Jaya Tiasa Holdings Bhd’s (Jaya Tiasa) fresh fruit bunches (FFB) has been viewed as gradually improving, analysts say.
AmResearch Sdn Bhd (AmResearch) upgraded its call on Jaya Tiasa to ‘buy’ on the back of improved FFB yields over the last four months and strong timber prices in the first quarter of the financial year 2016 (1QFY16).
It also upgraded its fair value of the stock to RM1.96 per share and pointed out that the stock provides a cheap entry into the oil palm play.
“At our fair value, we are pricing the oil palm division at an enterprise value per planted hectare (EV/planted ha) of RM24,000 – cheap by any measure. At the current price, the implied value is only RM14,000 per ha,” it explained.
“Recall the EV/ha for brownfield land bank in Sabah and Sarawak is reportedly in the range of RM62,000 to RM68,000.
“We believe the current discount is unjustified, notwithstanding its low FFB yield (at only 12.5 tonnes per mature ha for FY15).
“Recall it has been affected by a contractor previously leaving large portions (5,000 ha to 10,000 ha) of its estates derelict; rehabilitation is continuing.
“Discounting 10,000 ha from the planted hectarage still gives an EV/planted ha of RM28,000,” it added.
Meanwhile, on the company’s performance, AmResearch noted that Jaya Tiasa reported a 1QFY16 core net profit of RM31 million, an increase of 97 per cent quarter-on-quarter (q-o-q) and 15 per cent year-on-year (y-o-y).
It explained, FFB production totaled 274,000 tonnes, an increase of 42 per cent q-o-q and an increase of nine per cent y-o-y, accounting for 30 per cent of the research team’s full-year projection.
Jaya Tiasa’s oil palm division eked out a profit before tax of RM2.4 million for 1QFY16.
For October, it noted that Jaya Tiasa reported it FFB production was at 95,599 tonnes, bringing the total year to date to 370,151 tonnes, an increase of 13 per cent from the previous four-month period.
“Despite 1QFY historically being the peak quarter, we believe it is still on track to meet or even slightly surpass our 900,000 tonne forecast.
“For that, it only needs to harvest 66,231 tonnes/month for the rest of FY16 versus the average of 61,665 tonnes per month for FY15.
“As such, we maintain our numbers for now,” AmResearch opined.
Aside from that, the research team noted that Jaya Tiasa’s log prices for 1QFY16 remained strong, registering at an estimated US$228 per cubic metre (a seven per cent increase q-o-q and y-o-y), while plywood prices improved by 12 per cent q-o-q and 11 per cent y-o-y.
“Note that according to its FY15 annual report, Jaya Tiasa’s log quota has been cut by 15 per cent to 78,000 cubic metres per month from 92,000 cubic metres per month.
“We have assumed a 24 per cent cut. We maintain our sales volume assumption for now,” it added.