Jaya Tiasa Holdings - Steady growth ahead, but rerating catalysts lacking

HOLD
Fair Value RM2.69

Investment Highlights 

• We maintain HOLD on Jaya Tiasa Holdings Bhd, with a tweaked fair value of RM2.69/share (vs. RM2.71/share ex-bonus previously) based on an unchanged 13x PE against its FY13F EPS of 20.7 sen. 
• The slightly lower fair value stems from housekeeping work in our model, to account for the sale of 2.2mil treasury shares after its private placement of 42mil shares and prior to the recent two-for-one bonus issue. 
• Jaya Tiasa yesterday announced the results for the final two months of its transitory 14-month fiscal period ended 30 June 2012 (FY12F). Its FY12F core net profit of RM157mil (+20% YoY) was within our expectations, accounting for 97% of our forecast of RM161mil, but was far below consensus estimate of RM205mil (<23%). 
• It declared a first and final dividend of 5.15 sen/share – post placement and bonus issue; as such, we deem the payout to be in line with our earlier projected GDPS of 15 sen/share based on the previous outstanding paid-up capital of 267mil shares, apart from the distribution of treasury shares recently. 
• JTiasa notes that the weakening Indian Rupee and the delay of Japan’s reconstruction efforts have affected the performance of the timber division. However, it expects the prospect for the sector to remain positive in view of the tight log supply condition and anticipated increase in demand for wood products from Japan’s reconstruction efforts. 
• It adds that the outlook of the oil palm sector remains positive due to the prolonged dry season and El-Nino effect. It expects the oil palm division to contribute positively to profitability with more trees entering prime production age and additional planted estates reaching maturity.
• We maintain our net profit forecasts for FY13F-FY14F of RM202mil (+50% YoY on annualised core earnings numbers for FY12) and RM211mil (+5% YoY) and introduce our earnings assumption at RM295mil for FY15F. We maintain our core assumptions. 
• Its monthly fresh fruit production (FFB) – according to its latest announcement on Bursa Malaysia – increased significantly by over 50% to 66,000 tonnes in July 2012 from an average of over 40,000 tonnes in the previous 14-month period. Traditionally, its FFB production peaks during 3Q of the calendar year. 
• We continue to expect FFB production to grow by 39% to 720,000 tonnes in FY13F from an annualised 518,400 tonnes for FY12, and by another 25% for FY14F. 
• We maintain HOLD for now due to the lack of catalysts. The key risks include falling CPO prices and further declines in the timber market.

Source: AmeSecurities