KUALA LUMPUR (May 27): Jaya Tiasa Holdings Bhd shares declined as much as 6.35%, following its slip into a net loss of RM8 million in the third quarter of financial year 2016 (3QFY16).

At 10.34am, the stock declined as much as 8 sen to RM1.18, before paring loses to trade at RM1.20.

A total of 707,700 shares were traded.

It was the 11th top decliner on the local bourse today.

The stock has been on a steady decline since April this year.

Jaya Tiasa slipped into a net loss of RM7.73 million in 3QFY16, compared to a profit of RM635,000 in the third quarter of financial year 2015 (3QFY15), due to wider losses at its plantation division as a result of higher costs.

Jaya Tiasa had said its fresh fruit bunch (FFB) unit cost of production rose 9% y-o-y due to higher fertiliser volumes applied, as well as higher finance costs.

For the first nine months of financial year 2016 (9MFY16), net profit, however, grew 94% to RM43.13 million, from RM19.19 million in 9MDY15, mainly due to higher contribution from its timber segment.

Revenue, however, declined to RM777.37 million in 9MFY16, from RM793.35 million in 9MFY15, caused by decrease in log and plywood sales volume due to lower
logs production volume.

In a note today, CIMB Investment Bank analyst Ivy Ng said Jaya Tiasa's 9MFY16 net profit was below expectations, as it accounted for only 31% of the research firm's and 43% of consensus full-year forecasts.

Ng said the group's 42% year on year (y-o-y) jump in fresh fruit bunches (FFB) production in 3QFY16 and higher crude palm oil (CPO) prices were not sufficient to offset the rising costs.

However, she said CIMB Investment Bank expects Jaya Tiasa to deliver stronger earnings in the fourth quarter of financial year 2016 (4QFY16), due to higher CPO prices and production.

"CPO prices improved by 10% to average RM2,647 in April, from 1QCY16’s average of RM2,403 per tonne," she said.

"This coupled with the seasonally higher production in 2QCY16, should boost Jaya Tiasa’s palm oil earnings," she added. However, she said the group's timber earnings could remain subdued, due to the weak global economy and stronger ringgit.

The research firm cut its financial year 2016 (FY16) to financial year 2018 (FY18) earnings forecasts by 31% to 38%, to reflect lower plantation and timber earnings, and reduce our sum of parts (SOP)-based target price to RM1.25 per share.

However, the research firm maintained its "Hold" call on the stock, as the share price is supported by its low price to book value (PBV) of 0.67 times.
Ng said upside risk to her target price was a higher-than-expected improvement in yields, while the key downside risk is lower timber sales.