KUCHING: Jaya Tiasa Holdings Bhd (Jaya Tiasa) achieved a new record yesterday as its fresh fruit bunches (FFB) production reached a new high of 103,074 metric tonnes (MT) in June this year.
AmInvestment Bank Bhd (AmInvestment Bank) in a report yesterday said the highest FFB production has brought the company’s financial year 2016 (FY16) ended June 2016 harvest to a total of 932,000MT.
The research firm calculated Jaya Tiasa’s total production for FY16 will translate into a yield of 15.3MT per mature hectare (ha) of oil palm plantation.
The numbers, it said, were 3.5 per cent higher than its forecast of 900,000MT of FFB production for FY16 with an estimated FFB yield of 14.7 mt per mature ha.
The research firm also observed that it was the first time Jaya Tiasa’s FFB production has breached the 100,000MT mark as compared to the company’s previous high of approximately 97,000MT recorded in September 2015.
With the encouraging FFB production recorded in June 2016, AmInvestment Bank has maintained its FFB yield forecast for Jaya Tiasa for FY17 and FY18 at 16.6MT and 17.8MT respectively.
Meanwhile, Jaya Tiasa in a filing to Bursa Malaysia on July 12 said the group’s logs and crops production for June 2016 were 42,592 cubic metres (logs); 103,074 mt (FFB); 12,356 (crude palm oil) and 2,403MT (palm kernel).
Additionally, the average age of Jaya Tiasa’s oil palm plantation trees was at eight years.
The research firm opined that the company’s plantation operation has entered the traditional peak harvest season in the first quarter of financial year 2017 (1QFY17) ending September 2016.
On another note, AmInvestment Bank noted Jaya Tiasa’s crude palm oil (CPO) production for FY16 which amounted to a total of approximately 120,000 MT was below its forecast of approximately 150,000 MT.
However, it was unable to ascertain the company’s actual palm oil extraction rate (OER) at this juncture.
It pointed out that a portion of Jaya Tiasa’s FFB harvest was sold to external parties at an estimated OER rate of 19 per cent.
For nine months of financial year 2016 (9MFY16) ended March, Jaya Tiasa’s recorded OER was at 17.4 per cent which was below AmInvestment Bank’s assumption of 18 per cent for FY16 in full.
“Despite the strong FFB production in June 2016, we forecast that the figure might not be sufficient to bring Jaya Tiasa’s oil palm segment into the black for the fourth quarter of financial year 2016 (4QFY16) due to lower volumes for April and May,” it added.
It observed that the company’s improving FFB production has coincided with declining CPO prices – from a high of RM2,770 per tonne on April 4, 2016 to a low of RM2,323 per tonne on 29 June 2016.
AmInvestment Bank believed another key risk to its forecast earnings for Jaya Tiasa was the log production volume which registered below its expectation.
It noted Jaya Tiasa produced 732,000 cubic metre of logs against its forecast of 840,000 cubic metre, which represented a difference of 13 per cent.
Nonetheless, the research firm expects Jaya Tiasa’s timber division to remain profitable in 4QFY16, with the average log export prices at above US$200 per cubic metre seen in FY16. Additionally, AmInvestment Bank said the recent 20 basis points cut in the overnight policy rate (OPR) will benefit Jaya Tiasa as most of the company’s borrowings were on floating rates.
It estimated that a 20 basis points cut in lending rates could results in a one to two per cent increase in earnings for Jaya Tiasa.
As a whole, AmInvestment Bank maintained its ‘buy’ recommendation on Jaya Tiasa, valuing the company’s shares price fair value at RM2.11 per share based on an estimated price-earnings of 22 times on FY17 forecast earnings.