RHB Research maintains buy on Jaya Tiasa, trims fair value to RM1.53

KUALA LUMPUR: RHB Research Institute has maintained its “buy” call on Jaya Tiasa but lowered its sum-of-parts-based target price to RM1.53 as it expect plantation valuations to moderate during crude palm oil (CPO) price downtrends.

“We expect the CPO price rally to be unsustainable, and anticipate it to moderate from hereon, given the abundant supply coming into the market in second half of 2017 on top of the still-lacklustre demand from China and India. 

“Taking into account Jaya Tiasa’s CPO price per tonne average of RM2,600 realised for Jun-Dec 2016, we lift our CPO forecast for FY17 to RM2,700 per tonne. However, we also cut our 2018 price per tonne assumption to RM2,400,” RHB said. 

The research house said the price of CPO hit a high of RM3,300 per tonne in January before moderating to RM2,900 a tonne levels currently. 

It believes that the rally was unsustainable, given the abundance of CPO coming into the market in second half of 2017.

“All in, our earnings forecast is revised upwards by 5.8% for FY17 and lowered by 4% for FY18. 

“We expect the group to post strong FFB production growth of 12% year-on-year for FY17 on the back of increasing prime mature trees which are estimated to make up 65% of Jaya Tiasa’s total planted area by Jun 2017,” RHB said. 

Nonetheless, RHB said Jaya Tiasa remained its top pick.

“At current share price, Jaya Tiasa is trading at a F17F P/E of 12 times, backed by a strong 3-year forecast earnings CAGR of 26%. 

“Given the sizeable oil palm land bank of the group with our expectations of higher CPO prices in 1H17, we think the group is on the right track to post stronger 2HFY17 earnings,” it added.