Sector Update � Timber (NEUTRAL,
maintain)
- Plantation to drive earnings
We believe that log supply is likely to remain
tight going forward due to diminishing natural forest resources along with
Myanmar�s recent ban on log exports, which started on 1 April
2014. This, we believe should keep average selling prices of timber products
firm or moderately higher going forward. Over the years, Jaya Tiasa, Ta Ann
and WTK, have been aggressively expanding their palm oil plantation. Their
FFB production will continue to increase on the back of expanding matured
estates and their attractive young palm tree age. The weighted average palm
tree age profile for the 3 companies are approximately 4-7 years old. We
maintain our NEUTRAL recommendation on the timber sector as we only foresee a
moderate pick-up in both demand and average selling prices of timber
products. However, we like the structural transformation via the
diversification into palm oil business, a future growth driver. Our
preferences for sector exposure are Ta Ann and WTK.
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