- We maintain BUY on Jaya Tiasa, with an unchanged fair value of RM2.40/share, based on a PE of 20x on an FY15F EPS of 12 sen/share.

- Jaya Tiasa posted a 2QFY15F core net loss of RM2.9mil, leading to a core net profit of RM23mil (-49% YoY) for 1HFY15 – making up only 20% and 23% of our and consensus full-year estimates. No dividend was declared.

- The full-year result is likely to come in below our estimates. However, we are unfazed as we look beyond FY15F at this half-way stage.

- We are now convinced that its oil palm division will reach an inflexion point in FY16F.

- The 1HFY15 FFB output and CPO production came in at 48% and 43% of our forecasts. For FY16F, we expect FFB and CPO production to increase by 18% and 36%, respectively. We are assuming CPO prices to average RM2,300/tonne for FY15F.

- We expect FFB yield to improve to 17.4% in FY16F from 15.8% in FY15F (FY14: 13.8%), and OER to rise to 18% from 17.5% (FY14: 15.5%).

- The plantation division posted a pre-tax loss of RM5mil in 2Q (vs. RM14mil profit in 1Q) as FFB output fell 27%, while CPO prices in 2Q averaged RM2,131/tonne (-2.9% QoQ, -2.4% YoY). OER fell 1ppt in 2Q, but for 1H, it was still up 2.9ppts YoY to 17.8%.

- For the timber division, we are surprised by the RM6.4mil pre-tax loss at the plywood and manufacturing division.

- The company said the loss was due to higher production costs QoQ as a result of a 54% and 28% decline in veneer and plywood production volume, respectively. We expect this to normalise.

- Logs continued to outperform expectations, with a 1HFY15 pre-tax profit of RM46.5mil, making up 57% of our full-year forecast for the division.

- It expects the average selling prices for the wood products to improve due to a low inventory level and tight supply of logs, coupled with sustainable demand.

- Our investment thesis remains, based on the fast growing oil palm hectarage reaching prime maturity over the next 1- 2 years.

- Jaya Tiasa is a beneficiary of any upward trend in CPO prices and the weaker ringgit. BUY for its high growth prospects, which remain intact.

Source: AmeSecurities