- We are placing our HOLD call and fair value (RM2.00/share) for Jaya Tiasa Holdings under review. The fair value is based on a PE of 15x FY14EPS of 13.4 sen.

- Jaya Tiasa yesterday announced a 1QFY14 core net profit of RM23.5mil (vs. –RM0.4mil in 4QFY13; +51% YoY) – which was below expectations and representing only 18% of our full-year forecast of RM130mil and 20% of consensus estimate of RM151mil. No dividend was declared.

- The core profit excludes EIs comprising RM2.67mil impairment in financial assets and a RM1.76mil loss on disposal of PPE.

- Revenue amounted to RM245.5mil, down by 10.5% YoY due to 29% and 15% fall in logs and plywood sales volume respectively, as well as 22% and 27% reduction in FFB and CPO ASPs, respectively.

- The higher YoY earnings were contributed by a 17% and 12% increase in logs and plywood ASPs, respectively.

- For the quarter, FFB production rose by 19.6% YoY (+42% QoQ) to 234,019 tonnes, but CPO production fell 13% YoY (+8% QoQ) due to a lower OER of only 15% vs. 16% a year earlier (vs. our OER forecast of 17%).

- The FFB production is in line with our expectation – accounting for 27% of our full-year forecast of 866,000 tonnes. The CPO average price fell by 27% YoY (-0.7% QoQ) to RM2,119/tonne vs. our projected RM2,350/tonne for the year.

- Log ASP at RM644/cu m (+2.4% QoQ; +17 QoQ) was 14% higher than our forecasted RM563/cu m.

- The plywood ASP was also much higher than expected at RM1,890/cu m (+4% QoQ; +12% YoY) vs. our projected RM1,581/cu m for the year. This was achieved on the back of a strong export average price of US$598/cu m.

- While prices have come down, log and plywood ASPs are still at above US$200/cu m and US$500/cu m, respectively.

- While we are revisiting at our numbers for Jaya Tiasa, its long-term prospects continue to be premised on the strong growth of its oil palm operations backed by:- 1) favourable age profile of oil palm trees; and 2) cost savings from three new mills over the next one to two years.

Source: AmeSecurities