The Star Online Thursday May 1, 2008
By C. S. TAN
PETALING JAYA: Timber group Jaya Tiasa Holdings Bhd has just completed its financial year ended April 30, (FY08) during which earnings could come in at half of that for FY07. There is anticipation that its earnings in the current financial year could replicate that of FY07, which was a fairly good year for the log and plywood market. In FY07, the group earned a net profit of RM121.9mil, or earnings per share of 47.5 sen, close to Ta Ann Holdings Bhd’s net profit of RM130.4mil for the year ended Dec 31, 2006. In the timber industry, Ta Ann is the most widely followed by fund managers, having been consistent in its investor relations. Jaya Tiasa has just commenced this process so that it will increasingly appear on the radar screen of fund managers.
There is reason to anticipate Jaya Tiasa would improve on its earnings for FY08 as plywood prices appear to have started on a recovery path over the last three months. After declining for a about year, plywood prices rose moderately in February over that in January, and improved further month-on-month through March and April, an official told StarBiz recently. Plywood prices declined year-on-year but analysts expect this trend to reverse in the coming months. The rate of this momentum is not clear yet but macro factors point to the possibility that this pace could accelerate as exports of plywood from China and logs from Russia are expected to decline. This time, Jaya Tiasa’s earnings will also be enhanced with the early fruits of its diversification into palm oil. Currently, the group has 5,000 ha of newly matured oil palms and “this will double to 11,000 ha in FY09 and double again to 22,400 ha in FY10,” said the official. By the time the group completes planting 67,700 ha, it would have one of the largest plantations in the country. Under its planting schedule, this will be done by 2010. Jaya Tiasa has so far spent RM550mil to develop the estates. This is a “bonus value” for shareholders as the group financed the huge capital expenditure entirely through the operating cash flow of its timber operations, and had not sought additional capital from shareholders. It had bought the land near Sibu to plant oil palm. This is not land from its timber concession, which must remain forested. The group has been so low profile that when it bought jungle land with a gross area of 83,480ha in 2001, it did not announce this with any fanfare. Its biggest shareholder is well-known timber tycoon Tan Sri Tiong Hiew King. Jaya Tiasa has timber concessions totalling 713,200 ha, or 2,750 sq miles in Sarawak, larger than Brunei (2,230 sq miles) and 10 times the size of Singapore (270 sq miles). Jaya Tiasa is allowed an extraction quota of 1.1 million cubic metres a year and has made full use of this quota, extracting 1.1 cu m of logs in calendar year 2007. Much of the logs have to be processed before they can be exported. Hence, plywood accounts for about 53% of its timber revenue, with logs accounting for 42% while sawn timber and veneer contribute about 5%.
