KUALA LUMPUR (March 16): AffinHwang Capital Research has maintained its “Neutral” rating for the timber sector and said the demand for Sarawak’s log in 2015 should stay strong in light of the global log shortage, which should also keep average selling price (ASP) high.

In a note Monday, the research house said that on the other hand, demand for plywood could weaken due to the sluggish housing starts.

“We maintain our Neutral sector view. Ta Ann Holdings Bhd remains our top pick for timber sector exposure.

“Jaya Tiasa Holdings Bhd, Ta Ann and WTK Bhd’s FFB production will continue to increase mon the back of expanding matured estates as well as their yields.

“The weighted average palm tree age profile for these 3 companies are approximately 4-7 years old. We retain our CPO ASP assumption of RM2,400/MT for 2015E and RM2,500/MT for 2016-17E,” it said.

AffinHwang Capital said it prefers Ta Ann for its improving earnings in 2015-17E as well as 5.1% dividend yield.

“Maintain Buy on WTK for its 2015-17E EPS CAGR of 17%. Meanwhile, we have a Sell call for Jaya Tiasa, as we think the stock is pricey and has already reflected expected earnings growth from its timber and plantation divisions,” it said.