Jaya Tiasa’s (JT) FY13 full-year  core  net  profit  was  below  our  and consensus  estimates,  coming  in  at  67%  of  our  forecast  and  53%  of consensus,  due  to  disappointing  losses  at  the  plantation  division.  We cut  our  FY14  forecast  by  8.5%  and  introduce  our  FY15  estimates. Maintain  Neutral  rating,  with  a  lower  SOP-based  FV  of  MYR1.96  (from MYR2.11).  
 
  Below expectations. Jaya Tiasa’s (JT) FY13 core net profit was below our and consensus estimates, coming in at 67% of our forecast and 53% of  consensus.  The  main  variance  was  the  continued  losses  at  the plantation  division  on  the  back  of  lower  CPO  prices  and  higher  unit costs. JT’s plantation division recorded a PBT loss of MYR11.96m in 4QFY13, bringing its FY13 profit contribution to just MYR2m. The group declared  a  first  and  final  single  tier  dividend  of  1  sen,  translating  into  a net payout of 41% and net yield of 0.5%.

  Core  net  profit  fell  80.6%,  revenue  up  1%.  The  rise  in  revenue  was mainly contributed by the timber division, which saw  4% and 12%  y-o-y increases  in  log  and  plywood  sales  volume  respectively.  However,  as fresh  fruit  bunches  (FFB)  and  crude  palm  oil  (CPO)  selling  prices  fell 28%  and  23%  y-o-y  respectively,  this  caused  the  plantation  division  to record a loss in 4QFY13, thus dragging down group earnings.  

  Log prices holding up and awaiting plywood price rerating. With the recent 20-30% y-o-y upward re-rating of log prices due to a shortage, we expect  prices  to  hold  at  current  levels  for  the  rest  of  the  year  and  into 2014. This would benefit Jaya Tiasa as it produces the largest volume of logs  annually  among  its  peers,  at  1.18m  cu  m.  While  plywood  prices have yet to move up as significantly (only up 3-5% y-o-y and q-o-q), we believe  this  is  on  the  way  given  the  usual  4-6 months’ lag to pass on higher log costs.  

  Maintain  NEUTRAL.  We  are  hiking  up  our  unit  CPO  production  costs slightly  for  FY14,  resulting  in  an  8.5%  downward  revision  in  earnings, and  introduce  our  FY15  forecast.  No  change  to  our  Neutral recommendation,  with  a  revised  SOP-based  FV  of  MYR1.96  (from MYR2.11).  While  Jaya  Tiasa  will  benefit  from  the  improving  timber industry  outlook,  any  improvement  there  will  be  somewhat  diluted  by weaker contributions from the plantation division.

Source: RHB