Losses wider than expected for WTK, Jaya Tiasa
The lower revenue from the timber division was due to a drop in log and plywood sales volumes, while revenue contribution from the palm oil division was affected by weaker CPO and PK prices.
KUCHING: Weak timber and plantation segments continue to drag the performance of Sarawakian players WTK Holdings Bhd ( WTK) and Jaya Tiasa Holdings Bhd (Jaya Tiasa).
This comes as Jaya Tiasa reported a revenue of RM637.7 million for its full financial year 2019 (FY19) – down by some 24.2 per cent year on year (y-o-y), while WTK reported a decline in its revenue for its first six months of FY19 (6MFY19) by 17.4 per cent y-o-y to RM322.2 million.
Researchers at Affin Hwang Investment Bank Bhd (AffinHwang Capital) saw that Jaya Tiasa’s lower FY19 results was mainly attributable to lower contributions from both the timber (a drop by 17.4 per cent yo-y) and palm oil (a 37.5 pct drop y-o-y) divisions.
“The lower revenue from the timber division was due to a drop in log and plywood sales volumes, while revenue contribution from the palm oil division was affected by weaker CPO and PK prices.
“Jaya Tiasa posted a loss before tax of RM198 million in FY19 versus a loss before tax of RM88.8 million in FY18, as both the timber and palm oil divisions were loss-making,” it added. “After excluding one-off items, Jaya Tiasa posted a core net loss of RM274.6 million in FY19
AffinHwang Capital
compared to a core net loss of RM78.8 mo;;opm in FY18.
“Again, this was below our expectation, mainly due to weaker-than-expected contribution from the timber division and a higher effective tax rate (due to de-recognition and reversal of deferred tax assets on unabsorbed tax losses in loss-making subsidiaries).”
In a seperate note, AffinHwang Capital saw that WTK’s 6M19 revenue decline was attributable to lower revenue contributions from its timber and plantation divisions, but this was partially offset by higher revenue from its manufacturing and trading division.
“The timber and plantation division’s revenue declined by 18.4 and 25 per cent y-o-y respectively to RM258 million and RM30.3 million, while the manufacturing and trading division revenue was higher at RM33.3 million, up 1.9 per cent yo-y. WTK posted a loss before tax of RM18.8 million against a loss before tax of RM18.5 million in 6MFY18.
“This was due to higher losses from the plantation division as well as a lower profit contribution from the manufacturing and trading division, but partially mitigated by lower losses from the timber division.”
After excluding one-off items, WTK recorded a core net loss of RM19.3 million in 6M19, narrowing slightly from a core net loss of RM19.5 million in 6M18. The 6M19 results were below our expectations, mainly due to weaker-than-expected contributions from the timber and plantation divisions.
WTK reported a drop in 2Q19 revenue of 20.5 per cent quarter on quarter (q-o-q) to RM142.7 million and the EBITDA margin was lower by 5.2 ppt to 2.3 per cent. WTK’s 2Q19 core net loss also widened to RM15.1 million against a core net loss of RM4.1 in 1Q19.
All these led AffinHwang Capital to project a 2019 core net loss of RM6.7 million for WTK, thereby cut its 2020 and 2021 core earnings per share ( EPS) forecasts for WTK by 61 per cent.
The cut in earnings, it said, is mainly attributable to lower log, plywood and CPO average selling price assumptions.
For Jaya Tiasa, it similarly anticipated a wider FY20 core net loss of RM19.3 million and cut its FY21 core EPS forecast by 17.8 per cent for the same reasons.