Jaya Tiasa Holdings Berhad announced that its wholly-owned subsidiary, Multi Greenview Sdn Bhd had acquired 140m ordinary shares of RM0.50 each, representing 9.87% of the issued and paid-up ordinary share capital in Rimbunan Sawit Berhad, from Pemandangan Jauh Plantation Sdn Bhd and Tiong Toh Siong Holdings Sdn Bhd. The total consideration of RM70m is made in cash and funded by borrowing. (Source: Bursa Malaysia)

Comments: We believe the acquisition represents an opportunity for Jaya Tiasa to expand its interest in the palm oil sector. This could help to improve the group’s future earnings and synergistic to the group. The palm oil division contributes about 29% to the group’s total revenue. Note that as at FY15, the group’s net gearing ratio was at 0.53x, and the acquisition would increase the group’s net gearing ratio to 0.57x, which we believe is still at comfortable levels. We maintain our FY16-18E forecasts as well as our HOLD recommendation on Jaya Tiasa with an unchanged SOTP derived target price at RM1.13. This based on 11x 2016E PE for its timber division, 12x PE for its plantation division, and 1x BV for its forest plantation.

Source: Affin Hwang Capital Research - 27 Oct 2015