Another long term entry - Joining the fun - Jaya tiasa

Two days ago I received a research report on Jaya Tiasa, a timber and plantation company from Sarawak. Although the projected growth in revenue and profit is too optimistic, the potential growth of this company in the next few years is real. I reckon the revenue for this year 2014 will be equal to 2013 and EPS in the region of 10 - 13 cents. An overview of the report:

Jaya Tiasa was previously a pure timber play with 713 211 hectares of forest concessions and 94500 m3 monthly extraction quota but marked its entry into oil palm plantations when it acquired a 90% stake in Simalau Plantation Sdn Bhd in 2001 to diversify their income stream to complement the cyclical timber earnings. Now its principal activities are extraction and trading of logs, manufacturing of timber products, development of oil palm estate, management of CPO mill and reforestation. 

Since 2002, Jaya Tiasa has planted a total of 63996 ha (average of 5229 ha per year) of oil palm in Sarawak. As a matter of fact, the peak planting was 12k in 2008. 

The pulling factors are:

1. Impending strong production: The average age of Jaya Tiasa's oil palm trees are around 6 years, with prime mature trees accounting only 12% of them all. The Fresh Fruit Brunch (FFB) from younger trees contain less oil. Thus the company's FFB and Oil Extraction Rate (OER) are below industry average at 13.9 tonnes/ha and 17% respectively. Prime mature trees can produce about 20 tonnes/ha and has OER of 21%. That is 6 more tonnes/ha without doing anything! So Jaya Tiasa will start to enjoy the productivity windfall soon, from 2014 and at the same time the plantation division should surpass timber division as the main earning driver.
   
2. Bright outlook for CPO price: CPO price is expected to remain resilient at RM2700 at the back of tight global supply of vegetable oils and high crude oil prices. Should prolonged dry weather occurs, then the prices will be even higher.
   
3. Timber division also contributing: Due to ban in log exports by Myanmar (effective 1st April 2014) and stable demand from India and increase in Japan economic activities, the outlook for timber division should be very good in the second half of the year.
   

So I bought an initial 2000 units today @ RM2.73 with a long term view of 1-2 years. Huat Fund looks like this now:

Financial assets at 24.04.2014
	Name	Purchase Date	Purchase Price	Current Price	Unit	Current Value	P/L ex Dividend (%)	Dividend	P/L inc Dividend (%)
Cash	Hle-Broking			18355,46
	Inari	24.02.14	2,30	2,8	10000	28000	21,9	72,5	22,2
	Sunreit	04.10.13	1,40	1,38	5000	6900	-1,2	188,8	1,5
	Cypark	22.10.13	2,17	2,99	3000	8970	37,7		37,7
	Jaya Tiasa	24.04.14	2,74	2,73	2000	5460	-0,5		-0,5
	Hovid	14.04.14	0,34	0,375	20000	7500	9,7		9,7
Total Stock				56830,00	75,6	%
Total cash				18355,46	24,4	%
Total				75185,46
Current profit				8301,27
Total profit				25185,46	50,4	%
Total dividend				611,13

Itchy Hands - Sold OCK

Without realizing it, the target price for OCK has been reached and as a result I sold all 5000 units of OCK @ RM1.26 today. I reckon OCK still have some upside potential due to the impending transfer to mainboard but a 60% profit in 4 months is good enough from me. Furthermore I am becoming weary of the constant rise in Bursa stocks. Somehow and sometime there is bound to be a correction and May is just nearby. Ever heard of the classic "sell in May and go away"?

As of now the realized profit stands at RM16534.36, which is enough to sustain 3 years of 10% return. The Huat Fund looks like this today:

Financial assets at 21.04.2014
	Name	Purchase Date	Purchase Price	Current Price	Unit	Current Value	P/L ex Dividend (%)	Dividend	P/L inc Dividend (%)
Cash	Hle-Broking			23843,85
	Inari	24.02.14	2,30	2,59	10000	25900	12,8	72,5	13,1
	Sunreit	04.10.13	1,40	1,32	5000	6600	-5,5	188,8	-2,8
	Cypark	22.10.13	2,17	2,91	3000	8730	34,0		34,0
	Hovid	14.04.14	0,34	0,36	20000	7200	5,3		5,3
Total Stock				48430,00	67,0	%
Total cash				23843,85	33,0	%
Total				72224,06
Current profit				5389,66
Total profit				22273,85	44,5	%
Total dividend				611,13