Sarawak-based timber players oh Sarawak-based timber players

KUALA LUMPUR: Sarawak-based timber players such as Jaya Tiasa Holdings Bhd ( Valuation: 1.40, Fundamental: 0.30), Ta Ann Holdings Bhd ( Valuation: 2.00, Fundamental: 2.30), WTK Holdings Bhd ( Valuation: 1.40, Fundamental: 1.65) and Subur Tiasa Holdings Bhd ( Valuation: 1.20, Fundamental: 0.40) have all had a good start to the new year in terms of share price performance, seemingly driven by a slew of positive news flow.

The top gainer among the four is Jaya Tiasa, which has seen its share price rise by 34.6% in the first three trading days of the new year to RM1.79 (from RM1.33 on Dec 31, 2015); followed by WTK, which went up 12.1% to RM1.48 (from RM1.32); Ta Ann, which rose 8.2% to RM5.43 (from RM5.02); and Subur Tiasa, gaining 7% to RM2.13 (from RM1.99).

An imminent state election, the weak ringgit against the US dollar and stable log prices are all factors driving the performances of these timber stocks, according to analysts.

In a Dec 21, 2015 note, AmResearch said Sarawak’s stocks were expected to come under the election-theme trading in early 2016, in the lead up the state’s 11th election, which is expected to take place in the first half of the year.

“For non-construction-related companies, we are now overweight on the timber sector and have buy [calls] for Jaya Tiasa and Ta Ann, as they benefit from strong log prices, and are prime beneficiaries of improving crude palm oil prices,” said AmResearch.

Another factor driving share price performance of timber stocks is the continued weakening of the ringgit, which was at 4.40 against the US dollar at the time of writing, and works in favour of timber exports, said MIDF Research analyst Jessica Low Jze Tieng.

“Looking at Ta Ann’s performance, the group has been enjoying the twin effects of the strong US dollar and higher export log prices as a result of shortage of logs. This may imply that the performance of other Sarawak-based timber players is following the same trend,” she told The Edge Financial Daily.

Jaya Tiasa’s share price climb was also spurred by its announcement on the eve of the new year that the Malaysian Anti-Corruption Commission (MACC) had lifted the freeze on its bank account, which was first frozen in relation to the agency’s investigation into illegal logging.

This follows the group’s announcement on May 15, 2015 that its subsidiary Jaya Tiasa Timber Products Sdn Bhd (JTTP) was assisting the MACC as part of the latter’s crackdown on illegal logging in the state. It had also stressed that JTTP was not involved in such activities.

“Jaya Tiasa’s announcement that its bank account had been uplifted by MACC sent positive signals to investors, as it definitely cleared any doubt they had on the company,” one bank-backed analyst told The Edge Financial Daily.

Public Invest Research, meanwhile, stated in a note on Monday that it is bullish on Ta Ann on stronger contributions from its timber and plantation segments, young tree-age profile, and likelihood of declaring higher dividend payout due to lower capital expenditure in the coming years.