Journey to Wealth
Jaya Tiasa - Higher costs, interest expense impact results HOLD
' We maintain HOLD on Jaya Tiasa Holdings Bhd, but with a higher fair value of RM8.82/share (vs. RM8.24/share previously), as we roll forward our valuation base to FY13F on a PE of 13x against an EPS of 67.8 sen.
' The company's results for the three months and 12 months to 30 April 2012 disappointed on the back of higher-thanexpected net operating costs and interest expense.
' It posted a net profit of RM173mil for the 12-month period ' accounting for only 77% of our previous forecast ' with only two months remaining for its 14-month transitory fiscal period to 30 June 2012.
' Excluding an exceptional gain of RM27.6mil on the disposal of a subsidiary, its core net profit YTD stands at only RM145mil ' representing only 74% of our previous core earnings forecast of RM197mil.
' As such, we have revised downwards the core earnings estimate for the 14-month period by 18% to RM162mil, in view of the higher costs and interest expense. We have also cut our earnings projections by 23% each for FY13F and FY14F on lower FFB production and timber earnings assumptions.
' The prospects for timber for the rest of the year appear bleak, as the economic slowdown in three major markets ' Japan, China and India ' dampen demand for wood products. Notably, while log prices are still hovering around US$200/cu m, the weak Indian rupee continues to be a major concern.
' We expect the timber division to register anaemic growth with PAT at RM42mil and RM46mil for FY13F and FY14F, respectively ' against FY12F's annualised PAT of RM59mil.
' Regardless, we still expect the oil palm division to post strong growth over the next two-three years ' at 35% for FY13F over the annualised earnings for FY12F and another 23% for FY14F.
' Another positive for the stock is the proposed 2-for-1 bonus issue (est. total of 645mil bonus shares) and a 15% placement of new shares (est. 42mil shares that may raise RM300mil, prior to bonus issue ' which will partly lower borrowings and keep gearing in check).
' Jaya Tiasa's proposals are aggressive measures to spur trading liquidity of its shares and would go a long way towards enhancing the attractiveness of the stock.
' Additionally, and as we had noted earlier, given the constrained cashflows from the volatile and uncertain timber market, the placement would raise much-needed funds for a more aggressive expansion of its plantation division.
Source: AmeSecurities
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
