Jaya Tiasa to turn around in FY20, says Affin Hwang

By Xavier Kong

TIMBER and plantation player Jaya Tiasa Holdings Bhd looks set to turn its earnings around in its 2020 financial year on the back of its oil palm plantation division.

“We expect FY20 to FY22E earnings for Jaya Tiasa’s palm oil plantation division to be driven by rising CPO (crude palm oil) production, as more plantation areas reach prime age and higher oil extraction rate (OER), along with better selling prices,” said Affin Hwang Capital analyst Nadia Aquidah.

She expected CPO prices to trend higher in FY20 due to stronger demand growth for palm oil products, especially from food and energy industries.

However, the boon from the group’s palm oil division looks to be partially offset by the timber division, which she believed will see headwinds. She noted that demand for tropical hardwood logs and plywood had softened in 2019, mainly due to stiff price competition.

“We think log and plywood prices should improve over time, given the prolonged supply shortfall as a result of declining yearly production due to diminishing natural resources,” Nadia said.

She also forecast Jaya Tiasa’s log and plywood average selling prices at between RM690 to RM760 per cubic metre and between RM2,050 and RM2,240 per cubic metre respectively. Plywood production costs are also assumed to be higher, due to lower production volumes.

Nadia maintained a buy recommendation on Jaya Tiasa, with a raised target price of RM1.55 from a previous RM1.

At noon, Jaya Tiasa’s shares were last done at RM1.04, up three sen, with 8.2 million shares changing hands. – Jan 7, 2020

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