KUCHING: Jaya Tiasa Holdings Bhd’s (Jaya Tiasa) earnings going forward will be driven by its plantation division.RHB Research Institute Sdn Bhd (RHB Research) said in its research report that the plantation division could potentially contribute 65 per cent to 75 per cent to group earnings for the financial year 2010-2011.
The assumption was generated from the higher pricing of RM2,700 per tonne from the previous RM2,350 per tonne for the financial year 2010-2012.
On the other hand, although plywood prices had stabilised and were slowly creeping up, the research house remained conservative and will only review the selling price assumptions for the plywood division once further information of a sustainable increase in plywood average selling prices was obtained via future orders.
The research house’s conservative review for the plywood division was between five to seven per cent year on year (y-o-y) for 2010-2012.
Reporting on the performance of the company, it was noted that the net profit of RM17.6 million for the first nine months of 2010 came within the research house’s and consensus expectations of 64 per cent and 61 per cent respectively.
This was in line as the fourth quarter of 2010 was expected to remain firm quarter on quarter (q-o-q) due to gradual recovery in the timber division coupled with higher crude palm oil prices of four per cent to five per cent q-o-q.
Y-o-y net profit increased 33.3 per cent despite a 9.3 per cent drop in revenue mainly from a 24 per cent revenue decline in the plywood division as a result of lower sales volume and average selling prices.
On a q-o-q basis, the net profit jumped by 300 per cent due to a 54 per cent and 14 per cent rise in sales volume of logs and plywood respectively. This was coupled with better margins from plywood division due to a 19 per cent drop in production costs.
As expected no dividend was declared for this quarter.
The research house noted that timber demand improved significantly resulting in higher-than-expected timber prices, a sharper-than-expected recovery in Japan’s economy and significant reductions in glue and logistics costs that could pose a risk to Jaya Tiasa.
As a result, the company was fairly valued at RM2.35 per share.