Jaya Tiasa’s 1QFY19 core net loss of RM0.5m (vs 1QFY18 core net profit of RM22.8m) came in below our expectation. The variance was mainly due to a weaker-than-expected contribution from the palm oil division. As such, we cut our FY19-21E earnings forecasts by 14-61% to account for these weaker-than-expected 1QFY19 results and lower our SOTP-derived TP to RM0.50 (from RM0.67). Maintain HOLD.

1QFY19 Core Net Loss of RM0.5m, Below Expectations

Jaya Tiasa reported 1QFY19 revenue of RM211m, down 17.5% yoy, mainly attributable to lower contributions from both the timber and palm oil divisions. The lower revenue from the timber division was due to lower log and plywood sales volumes, down 67% and 39% yoy, respectively, while the palm oil division was affected by the weaker FFB ASP, down 19% yoy. Jaya Tiasa posted a PBT of RM1.5m in 1QFY19, declining by 95.2% yoy, mainly attributable to a slump in profit from the palm oil division due to a lower profit margin as a result of lower CPO prices, despite an increase in its sales. After excluding one-off items, Jaya Tiasa posted a core net loss of RM0.5m in 1QFY19 as compared to a core net profit of RM22.8m in 1QFY18. This was below our expectation, mainly due to the weaker-thanexpected contribution from the palm oil division.

TP Lowered to RM0.50; Maintain Our HOLD Rating

We have cut our FY19-21E core EPS estimates by 14-61% after the weaker-than-expected 1QFY19 results, mainly to account for the lower margin from the palm oil division. Due to our earnings cut, our SOTPderived TP for Jaya Tiasa is lowered to RM0.50 (from RM0.67) based on an unchanged 8x 2019E PER for the timber division, an unchanged 10x 2019E PER for the plantation division and an unchanged 1x PBR for the forest plantation. Maintain HOLD rating for Jaya Tiasa.

Key Risks

Key upside/downside risks include: 1) stronger/weaker economic growth leading to a higher/lower consumption of vegetable oils; 2) a sustained rebound/plunge in the CPO price; 3) higher/lower-than-expected FFB and CPO production; and 4) changes in government policies.

Source: Affin Hwang Research - 29 Nov 2018