AffinHwang Capital maintains Neutral on timber sector, top picks Ta Ann, WTK

by **Cals** Wed 24 Dec 2014, 19:25

AffinHwang Capital maintains Neutral on timber sector, top picks Ta Ann, WTK

KUALA LUMPUR (Dec 24): AffinHwang Capital Research has maintained its “Neutral” rating on the timber sector with Ta Ann Holdings Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) and WTK Holdings Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) as its sector top picks.
In a note Wednesday, the research house said its Neutral rating was in view of the flattish outlook for plywood division and its lower crude palm oil (CPO) average selling price (ASP) assumptions, which offset the US dollar appreciation and higher export volumes for logs.
The research house said with palm-oil inventories at a 21-month high, the plunge in crude-oil prices and likely record South American soybean harvest have added further pressure on CPO prices, impacting Ta Ann and Jaya Tiasa Holdings Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) which have CPO mills.
However, it said a weaker ringgit was supportive and it expects stockusage ratios for vegetable oils to tighten.
“Also, it makes sense for Malaysia and Indonesia to achieve their biodiesel targets.
“Affin Hwang recently cut its CPO ASP by RM200/MT to RM2,400/MT in 2015E and RM2,500/MT in 2016-17E,” it said.
Meanwhile, AffinHwang Capital said plywood demand has slowed in 9M14, especially from Japan, Korea and Taiwan.
It said the plywood demand from Japan had weakened after a consumption tax increase in April 2014.
“This, coupled with the weakening of the Japanese yen, which has pushed the cost of imported products higher, are bad news for the sluggish housing market.
“Fortunately, the global shortage for logs has slightly lifted the ASPs for plywood products,” it said.