WTK's FY12 earnings of RM45.6m (-33.2 y-o-y) missed our estimates but were in line with  consensus  estimates.  Profits  suffered  amid  poor  weather  conditions  in Sarawak and persistently weak timber demand. We lower our plywood ASP slightly as we  still  do  not  see  concrete  evidence  of  strengthening  demand  from  Japan.  We cut our FY13 earnings by 7.9% and lower our FV to RM0.97. Maintain NEUTRAL.

Short on  OSK estimate,  but  in  line with  consensus. WTK registered 4QFY12 revenue of RM195.6m (-7.1% y-o-y, -1.9% q-o-q) and earnings of RM10.5m (-47.7% y-o-y, -39.0% q-o-q).  Unfavourable  weather  conditions  in  Sarawak  slowed  sales  volume  while  weak timber selling prices dragged down profits. Meanwhile, its full-year FY12 revenue and net profit  came  in  at  RM768.7m  (+12.0%  y-o-y)  and  RM45.6m  (-33.2%  y-o-y)  respectively amid slowing log demand and soft plywood prices. The year's earnings fell  short  of  our estimates, accounting for 91.5% and 98.9% of our and consensus forecasts respectively.

Timber prices still under pressure. In FY12, WTK's round log sales volume dipped 3.4% y-o-y amid poor weather and slow uptake from its major customers. India continued to be the company's largest round log export destination, representing 79% of  the group's overall  log  sales.  Demand  from  China,  meanwhile,  accounted  for  11%  of  its  total  log volume. In contrast, WTK's plywood division volume surged 25.7% y-o-y in FY12. Selling prices  remained  unattractive,  falling  by  7.6%  y-o-y.  Buyers  from  Japan  and  Taiwan combined accounted for nearly all of the company's plywood sales, with Japan accounting for  88%  of  its  plywood  volumes.  While  hopes  are  high  on  Japan's  accelerating  fiscal spending and infrastructure expenditures giving timber demand a boost, recent prices and housing starts data have yet to provide concrete evidence of a recovery in demand.

Maintain  NEUTRAL.  We  are  moderating  our  FY13  plywood  selling  price  assumption slightly and lowering our FY13 earnings forecast by 7.9%, but keeping our FY14 estimates unchanged. We value WTK at a FV of RM0.97, based on a 9.0x FY13 PER.

Source; OSK