Palm oil division to drive Jaya Tiasa earnings, says Affin Hwang

KUALA LUMPUR: Jaya Tiasa Holdings Bhd's palm oil division is expected to drive earnings due to rising CPO production, better prices and lower production costs.

Affin Hwang Capital research said CPO prices are expected to increase in 1QCY19 as Malaysian palm-oil invesntory declines given the seasonal production declines and higher world palm oil consumption.

"For Jaya Tiasa, we forecast CPO ASP to be RM2,230-2,500/MT for FY19-21E after prices bottomed out at RM1,720/MT in Nov-18," it said.

For its timber division, the research house forecasts that it will turn provitable in FY19E from loss-making in FY18, mainly due to an increase in tumber product average selling prices.

This will be partially offsert by the decline in timber products sales volume due to lower log production in FY19-21E.

"Similar to Ta Ann, Jaya Tiasa is also applying for Certificate for Forest Management Units (FMU), which allows the company to increase their log exports quota to 40% from 20%. Jaya Tiasa could potentially obtain the certificate by 2020," said Affin Hwang.

The research house made no major changes to its FY19-21E core earnings per share forecasts and maintained its hold call with an unchanged target price of 50 sen.