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Thursday, April 24, 2014

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


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