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Company Update � Jaya Tiasa (REDUCE,
maintain)
- Dry weather could affect 2H14 production Jaya Tiasa�s 1H14 log production declined by 5.9% yoy to 482,064m3. Similarly, the average monthly log production YTD was lower at 80,344m3 as compared to 85,382m3 in 1H13. According to management, the decline in log production was partly due to weather conditions that slowed down the process of harvesting logs. In tandem with the weak log production, we expect less robust log production for FY15-16. We cut our FY15-16E core EPS by 16-25% after imputing: 1) a lower log production assumption, down by 4% for FY15-16 to 1,009,260m3; and 2) a lower assumption of Jaya Tiasa�s average selling price of logs to US$220/m3 for FY15-16 from US$230/m3. After our earnings reductions, stock looks overvalued and we believe it has already priced in expected sharp earnings growth from the plantation division. We maintain our REDUCE rating but lower our SOTP-derived target price to RM2.15 (previously RM2.59), based on a 12x 2015E PER for the timber division, a 14x 2015E PER for the plantation division and book value for the forest plantation
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