• Jaya Tiasa’s 6MFY21 core net profit of RM54.3m (>100% yoy) came in within our expectations. Higher profits from palm-oil division negated by timber division losses
• No Changes Made to Jaya Tiasa’s FY21-23E Forecasts
• Our SOTP-derived TP is unchanged at RM1.32, and we maintain our BUY rating on Jaya Tiasa

6MFY21 Core Net Profit at RM54.3m – Largely Within Expectations

Jaya Tiasa’s 6MFY21 revenue was lower by 11.2% yoy at RM372.6m, mainly attributable to the lower contribution from the timber division (due to a decline in log and plywood sales volume) but partially offset by higher revenue from palm oil (due to higher CPO selling prices). 6MFY21 EBITDA margin increased by 12.1ppt yoy to 44.9% due mainly to better margin at the palm-oil division. Jaya Tiasa posted a higher PBT of RM55.6m in 6MFY21, up >100% yoy, due to stronger profits at its palm-oil division and narrowing losses at its timber division. After excluding one-off items, Jaya Tiasa posted a core net profit of RM54.3m (>100% yoy) in 6MFY21, which came in largely within our expectations.

Weaker Qoq Core Net Profit

Jaya Tiasa’s revenue in 2QFY21 declined by 31.5% qoq to RM151.5m, attributable to lower contributions from both its palm-oil (due to reduction in sales volume of CPO and PK) and timber divisions (due to reduction in sales volume of log and plywood). Jaya Tiasa reported a PBT of RM8.6m in 2QFY21, down 81.7% yoy, due to lower palm-oil profit and higher losses from its timber division. Excluding the one-off items, Jaya Tiasa reported a lower core net profit by 44.3% qoq to RM19.4m.

Maintain BUY Rating on Jaya Tiasa

Given that 6MFY21 results were within our expectations, we make no changes to Jaya Tiasa’s FY21-23E core EPS forecasts. Our SOTP-derived TP is unchanged at RM1.32 (based on 14x 2021E PER for plantation and 1x PBR for forest plantation) and we maintain our BUY rating on the stock.

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 - 1 Mar 2021