It said on Friday the main earnings drivers include rising log prices, the weakening of the ringgit against the US dollar (which will benefit its export-derived revenue) and a rise in crude palm oil (CPO) prices.
“Maintain Overweight on the sector, with Jaya Tiasa as our Top Pick,” it said. It has Buy calls on WTK Holdings (FV: RM1.80), Ta Ann Holdings (FV: RM5) and Jaya Tiasa (FV: RM2.95).
“We expect tropical log prices to start increasing again from 2H2014 after any existing inventory of logs held by importing countries comes down.
“We nudge up our FY14-15 projections for WTK by 3%-7%, while our FV rises to RM1.80 (from RM1.76). As we expect its earnings to be boosted by higher log prices, we maintain Buy on the stock.
“We raise our FY14-15 earnings forecasts for Jaya Tiasa by 4%-10%, and nudge up our sum-of-parts based FV to RM2.95 (from RM2.80). Maintain Buy, as we expect higher CPO and log prices to boost earnings.
“We raise our FY14-15 earnings forecasts for Ta Ann by 2.5%-4%, and our SOP-based FV to RM5.00 (from RM4.88). Maintain Buy, as we expect higher CPO and log prices to boost earnings,” said RHB Research.
source: The Star