Photo shows Ta Ann s facilities. Ta Ann has said it had already anticipated log prices to moderate in the beginning of the year but expected it to trend higher in the following months. Jaya Tiasa’s log prices are lower as a portion of its logs is sold in the domestic market.
KUCHING: Barisan Nasional (BN) winning a landslide victory in the 11th Sarawak Election, clinching yet another two-thirds majority, could push Sarawak stocks towards a rebound as they have dipped over the past month.
These include Hock Seng Lee Bhd (HSL), KKB Engineering Bhd, Sarawak Cable Bhd, Jaya Tiasa Holdings Bhd (Jaya Tiasa), Ta Ann Holdings Bhd (Ta Ann), and Cahya Mata Sarawak Bhd, said AmInvestment Bank Bhd (AmInvestment Bank) in a report yesterday.
“HSL has fallen by some 10 per cent from RM2 share a month ago,” it detailled. “We believe HSL deserves a higher valuation, following its securing of two major contracts over the last month.
“They are the RM750 million second package Kuching central wastewater project and the RM1.7 billion Package 7 of the Pan Borneo Highway. The primary question now is whether it can deliver the result.”
Yesterday, HSL dropped two sen to close at RM1.80 per share, with 2.27 million shares traded.
HSL is now currently trading at 11.3 times against AmInvestment Bank’s financial year 2016 forecast estimates for earnings per share (EPS).
This means that its price earnings ratio (PE) for the past three years is 12.5 times.
“We have a buy on HSL, and our target price of RM2.80 per share tags it at 16.4 times FY16F,” it added.
For timber stocks, AmInvestment Bank observed that Ta Ann and Jaya Tiasa have fallen between six per cent and 10 per cent, respectively, over the past one month.
“While it has partly to do with declining log prices from a high of US$270 per cubmc metre last year, investors also feared an election result that could jeopardise their timber concessions,” it added.
Ta Ann closed unchanged at RM4.74 per share, while Jaya Tiasa closed three sen lower at RM1.35 per share.
“To note, all of their timber concessions have expired and are being extended annually, pending the state’s decision on longer term plan to grant the timber players a longer concession period of 60 years.
“Though the degree of decline of log prices is still not clear ahead of the companies’ result announcement this month, it could be over 20 per cent from last year’s high, with the prices now averaging about US$220 to US$225 per cubic metre.”
Ta Ann has said it had already anticipated log prices to moderate in the beginning of the year but expected it to trend higher in the following months. Jaya Tiasa’s log prices are lower as a portion of its logs is sold in the domestic market.
“We maintain our hold call on Ta Ann, with a fair value of RM5.28 per share. A 1-for-5 bonus issue is pending,” it added. “Jaya Tiasa is still a buy, with a fair value of RM2.18 per cent share, as we continue to expect its fresh fruit bunch yield to recover, which will have a significantly impact on its palm oil division.”
For local engineering player KKB Engineering Bhd, AmInvestment Bank saw that its price has held steady, down three per cent from a month high of RM1.68 per share on April 22.
Yesterday, KKB rose by two sen to RM1.65 per share at closing.
“We maintain buy with a fair value of RM2 per share. While we expect its 1HFY16 results to be poor – given the lack of conventional job awards so far into 2016 – its prospects remain promising, with a package of the Pan Borneo Highway still within sight.
“As we have also previously noted, KKB stands also good chance in securing jobs to supply steel products for the massive highway project in the form of water pipes, steel poles, guardrails, and bridge steel beams and piles.”