Jaya Tiasa Holdings - Re-rating on prime mature area growth Buy

kiasutrader

Publish date: Fri, 24 Jan 2014, 09:54 AM

- We upgrade Jaya Tiasa to a BUY (from HOLD previously) with an upward revised fair value of RM2.85/share (vs. RM2.00/share previously).

- The FV is based on a higher PE of 18x (vs. 15x previously) on FY15F EPS of 15.8 sen. This is underpinned by its plantation division at an inflexion point in the growth of prime mature area and FFB production.

- At the current price, the plantation unit, based on a residual value of ~RM40,000/planted ha (excluding timber), is tagged at a steep 25% discount to its nearest peer IJMP’s RM53,000/planted ha.

- At RM2.85/share, Jaya Tiasa’s plantation’s planted area would be fairly valued at ~RM49,000/ha, but still at an ~8% discount to IJMP’s and almost half of the select average (See Tables 1-3 on Page 2, and Table 7 on Page 4 for IJMP’s tree age profile and Table 8 on Page 5 for Jaya Tiasa’s).

- Additionally, the higher PE of 18x is still a notch below its 5-year average forward PE of 19x and two notches below the simple average PE of 20x for FY14F for Malaysian plantation stocks (See Chart 1 and Table 4 on Page 3).

- With calendarised earnings, Jaya Tiasa is currently trading at only 16x and 13x PE for CY14 and CY15, respectively. At our fair value RM2.85/share, it is at 20x and 17x, respectively.

- The higher valuation is supported by the following:- 1) We project a surge in prime mature areas to support its strong FFB growth – by 30% to 866,000 tonnes in FY14F, by 20% to breach 1mil tonnes at 1.05mil tonnes in FY15F, and by another 10% in FY16F. The prime mature areas (>7years) will rise from just 12% of total planted areas in FY13 to >50% by FY16F, which will significantly improve FFB production yield as well as OER. The oil palm trees’ current average age is at 6 years. 2) The addition of 2 more CPO mills, within individual estates, will slash transportation cost by 40%, if not more. Transportation now accounts for between RM45-RM50/tonne. 3) We concur with the general expectations that timber prices – with plywood and log export prices at above US$200/cu m and US$500/cu m respectively – should sustain at current levels.

- Even beyond our fair value, we believe that the stock has more legs on the upside, starting from FY15F onwards as operating performance dictates. Downside risks will be limited – hinged largely on the performance of CPO prices (See Table 6 on Page 4 for CPO price sensitivity).

Source: AmeSecurities

JTIASA (4383)

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Be the first to like this. Showing 8 of 8 comments

Koon Yew Yin

I must point out that the above analysis did not consider JT's timber business which it has the essential competitive advantage. JT owns 2400 sq Kilometer of forest which is providing all the raw material for its plywood and other timber production while manufacturers from China, India, Taiwan etc have to import logs.

Further please refer to the following graph which highlights the FFB production in metric tons since 2007:

https://dl.dropboxusercontent.com/u/32513415/Jaya%20Tiasa%20FFB%20Production.JPG

2014-01-25 15:06

kk123

Jaya tiasa I had a feeling this stock is not that good
Either that or the mgmt can't manage well enough to give good returns to
shareholders ..
Better look at TAAN which in my view is far far superior

2014-01-25 15:12

kk123

I feel that taan is a far far superior and bigger company vs jaya tiasa in the timber wannabe plantation company category
And it's expending faster like on steroids
The best plantation company is actually united plantation
They have best management , usage of land , highest yield , R& d and best they produce tons of coconuts .. Which is shortage now
Anyhow A superior share means superior price Of rm 28
Jtiasa is just a kucing kurap share if we put the giants like united plant , klk , boustead and the sleeping giant but similarly poorly manage sime Darby to compare

2014-01-25 15:20

tc2012

I feel that kk123 is always against uncle Koon.I feel that kk123 has some ulterior motive sound like mamak kutty . I feel that kk123 have personal grudges and I feel that ..........please lah use facts and figure to support your arguement

2014-01-25 16:30

speakup

if want to follow Mr Koon in JTiasa, just follow.
if dont want to follow Mr Koon in JTiasa, dont follow.
No need to insult Mr Koon.

2014-01-25 16:58

speakup

Mr Koon is not putting a gun on your head forcing you to buy JTiasa.

2014-01-25 16:59

stockoperator

Mr Koon is a prominent businessman. Surely He is few level above each of us and his foresight is few years ahead of us. Who are we to analyse his company right? Our analytical standard is far below HIs foresight right?
Well having said, could he be wrong about his own company? Surely, everybody could be wrong Even the founder could chart the wrong course for the company future. Lets be fair ok. This is not criticism right?
At the moment we appreciate Mr Koon continued to share his Business Insight with us. I hope each one of us are humble enough to learn.

2014-03-04 14:12

BuLLRam

i agree. Mr. Koon has more biz n stckmkt savvy, acumen n certainly brain cells compared to some whinyy asses...

2014-03-04 14:41

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