JAYA TIASA - From Timber To Oil Palm Tree

Recently a friend of mine asked me how do I look on Jaya Tiasa Holdings Berhad since its share price slumps over 25% from its peak of around RM10 (price before Ex-bonus issue) in April, so let me share my opinion about JAYA TIASA (JTIASA) here.

JTIASA is believed to be sister company with Rimbunan Sawit. Both of the companies are controlled by Sarawak tycoon, Tiong's family. Different from Rimbunan Sawit, besides of oil palm operation, the main revenue of JTIASA comes from timber. JTIASA has forest concessions of 713,211 hectares, 83,480 hectares of oil palm plantation (55,766 hectares planted) as per 2011.

While the timber business counts for around 3/4 of the total revenue of JTIASA, most of the profit is actually came from oil palm plantation. Based on the financial report end 30th June 2012, it shows that around 65% of the total profit comes from oil palm. Monthly production reports wise, recently the production of timber is stagnant while the production of oil palm is actually improving. Besides, the oil palm plantation of JTIASA is still very young (the average tree age is around 4 - 6 years old), we can say that oil palm will become the main growth engine for JTIASA in the future.

Anyway, currently the oil palm price is really not doing well at the moment. The CPO (crude palm oil) price shrinks dramatically from the peak of RM 3,600 level per metric tonne in April to RM 2,700 level recently. Too many bad news are haunting the CPO price currently, e.g. the increase of inventory level amid the growth of production is faster than export, Indonesia's export tax cut on CPO from 15% to 13.5%, and the prediction of better soy oil production due to better weather in America.

I don't think JTIASA will come out an exciting result for the next coming quarter due to weak CPO & timber price. Currently the company is doing shares buy back at price range of RM2.40-2.45 to support the price of JTIASA. I will only see bright future on JTIASA should the CPO price can stand at RM 3,000 level or above in the future.

Technical wise, from the chart above, currently JTIASA is trending downward. It may have some chances to get a technical rebound to 2.75. The immediate support level is 2.40. Should the price closes 3 bids below 2.40, the support level will be violated & the down trend will dominate the price movement. The next support level will be 2.00.

Note: The above content is just a blogging activity that purely share my investment thoughts & ideas and should not be used as recommendation to buy or sell any securities. I may already have position in the above securities. Any action that you take from the opinions or information of this blog is solely on your own responsibility. Please consult your investment advisor before you make any investment decision.