- We maintain HOLD on Jaya Tiasa, with a downward revised fair value of RM1.18/share (vs. RM1.57/share previously) based on an FY16F PE of 15x.

- Jaya Tiasa posted a 4QFY15 core net profit of ~RM13mil (+304% QoQ, +28% YoY), bringing the total for the full year to RM39mil (-40% YoY) – below our expectation and accounting for only 67% of our forecast.

- Though the timber division performed better than expected, the group plantation segment was still beset by low FFB yield and OER amid low CPO prices.

- The plantation division achieved a CPO average price of RM2,166/tonne (-7% YoY) vs. our assumption of RM2,300/tonne.

- The bright spot was a continuing improvement in OER at 17.2% vs. 15.5% in FY14 – in line with our forecast of 17.5%.

- FFB yield came in at only 12.5 tonnes/ha vs. FY14’s 13.8 tonnes/ha, and our assumption of 13.4 tonnes/ha. It has been affected by the previous contractor leaving large portions (of at least 5,000ha) of its estates derelict and unharvested; rehabilitation is continuing.

- Effectively, Jaya Tiasa achieved a harvest of ~62,000 tonnes/month for FY15. Encouragingly, for the month of July, 2015, harvest reached ~82,000 tonnes, according to its latest monthly production numbers released through Bursa. We have assumed production of 75,000 tonnes/month for FY16F. It still has to contend with low CPO prices.

- While the timber division performed better than expected, log harvest was cut by 17% to ~74,000 cu m/month in FY15 from ~86,000 the previous year.

- Nonetheless, both the logs and manufacturing divisions benefited from the weaker ringgit in FY15, posting PBT of RM108mil (68% YoY) and RM17mil (-19% YoY), respectively. Better plywood earnings were partly offset by lower volumes.

- We maintain Hold on Jaya Tiasa, as it could potentially be affected by a log quota cut, and in view of the current low CPO prices.

- Mitigating factors include the weaker ringgit and the sustaining of high log prices amid the shrinking supply out of Sarawak.

Source: AmeSecurities Research - 1 Sep 2015