• Jaya Tiasa’s 1QFY21 core net profit of RM35m (1QFY19 core net profit: RM16.8m) came in above expectations due to better-than-expected contribution from its plantation division
• We raise our FY21/22E core earnings forecasts by 126.4%/37.1%, to mainly take into account higher plantation earnings given the higher CPO ASP assumptions
• Our SOTP-derived TP has also been raised to RM1.32, we maintain our BUY rating on Jaya Tiasa.

1QFY21 core net profit at RM34.9m – above expectations

Jaya Tiasa’s 1QFY21 revenue was lower by 4.9% yoy at RM221.1m, mainly attributable to lower contribution from the timber division (due to decline in log and plywood sales volumes) but partially offset by higher revenue from palm-oil (+2.7% yoy due to higher CPO selling prices). EBITDA margin in 1QFY21 increased by 4.7ppt yoy to 43.1% due mainly to better margin at the palm-oil division. Jaya Tiasa posted a higher PBT of RM47m in 1QFY21, up 51.5% yoy, due to stronger profits at palm-oil division and narrowing losses at timber division. After excluding one-off items, Jaya Tiasa posted a core net profit of RM34.9m (>100% yoy) in 1QFY21, which came in above our expectations. The variance was mainly due to better-than-expected results from the plantation division given higher CPO selling prices achieved.

Weaker qoq core net profit

Jaya Tiasa’s revenue in 1QFY21 increased by 58.5% qoq to RM221.1m, attributable to higher contribution from both its palm-oil (due to improvement in the sales volume of CPO and PK and higher average selling prices) and timber (due to higher log sales volume) divisions. Jaya Tiasa reported a PBT of RM47m in 1QFY21 vs. a LBT of RM109.9m in 4QFY20 (there was an impairment on PPE in 4QFY20). Excluding the one-off items, Jaya Tiasa reported a lower core net profit of RM34.9m, down 45.3% qoq due to its lossmaking timber division.

Maintain BUY rating on Jaya Tiasa

Given the better-than-expected results, we raise our FY21/22E core EPS by 126.4%/37.1%, mainly to take into account higher contribution from the plantation division. Our revised CPO ASP assumption for FY21E is RM2,650/MT and RM2,530/MT for FY22E (from RM2,420/MT-2,480/MT previously). After the earnings forecast revisions, our SOTP-derived TP is raised from RM1.13 to RM1.32 (based on 14x 2021E PER for plantation and 1x PBR for forest plantation) and maintain our BUY rating.

Key risks

Key downside risks for our BUY rating on Jaya Tiasa include: 1) much weaker economic growth leading to higher consumption of vegetable oils; 2) a sustained decline in the CPO price; 3) lower-than-expected FFB and CPO production; 4) lower-than-expected log production and selling prices; and 5) unfavourable changes in government policies.

Source: Affin Hwang Research - 27 Nov 2020