- We downgrade Jaya Tiasa Holdings Bhd to HOLD, with a slightly downward revised fair value of
RM8.24/share (vs. RM8.37/share previously), based a PE of 13x its annualised FY12F
core EPS of 63.4 sen (vs. basic EPS of 64.4 sen previously).
- The stock has reached our previous fair value since last
week after it announced a 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).
- Its proposed dividend of one treasury share for every 20 shares
held will go ex- on 6 April 2012. We believe Jaya Tiasa’s latest proposals are
aggressive measures to spur trading liquidity of its shares and would go a long
way towards enhancing the attractiveness of the stock.
- We welcome the proposals in the belief that management is signalling
strong intent in fiscal prudence (though gearing remains manageable), while
preparing the group for its next phase of mid-cycle growth in the oil palm
sector, with potential landbank acquisition ahead.
- Our downward adjustment to FY12F earnings follow the
result for the three months to 31 January 2012, which came in slightly below
expectations due to lower CPO prices (QoQ and YoY), and a decline in log prices
given the significant slowdown of exports to India in view of the weakening
Rupee during the period.
- Its net profit of RM143mil (+54% YoY) for the nine months
to 31 January accounted for 83% of our previous annualised FY12F net profit of
RM172mil. However, excluding an exceptional gain of RM27.6mil on the disposal
of a subsidiary, the core net profit of RM115mil (+24.4% YoY) would bring that down
to 67% (vs. 70% now given our revised annualised earnings to RM164mil).
- Log prices have improved in view of the strengthening
Rupee in the recent months. Sarawak Timber Association this week said new orders
from Japan's plywood importers had continued to flow in since late last year
and that Sarawak manufacturers would
benefit from anticipated stronger demand from Japan at the start of spring next
month.
- The oil palm division, which accounted for over 60% of its
latest quarterly earnings, is expected to continue to perform significantly
better than the timber division given the current strong CPO prices.
- Our target PE of 13x is conservative vis-à-vis its forward
PE mean of 20x, and well within 1+SD and -1SD of 9x and 31x, respectively.
Source: AmeSecurities
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