Construction, plywood demand picks up in Japan

by **Cals** Wed 17 Apr 2013, 11:37

Construction, plywood demand picks up in Japan
Business & Markets 2013
Written by theedgemalaysia.com
Wednesday, 17 April 2013 09:43

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Timber sector
Maintain underweight: We reiterate our “underweight” stance on the timber sector, with “hold” calls on TA ANN HOLDINGS BHD [] (fair value [FV]: RM3.40), based on a price earnings ratio (PER) of 13 times forecast financial year 2013 (FY13F) earnings per share (EPS) of 26 sen, and JAYA TIASA HOLDINGS BHD [] (FV: RM1.68 per share) based on a 13 times PER on FY14F EPS of 13 sen.

A local business paper reported yesterday that Japan is increasing its imports of plywood from Sarawak as reCONSTRUCTION [] has picked up momentum in coastal towns badly damaged by the earthquake and tsunami two years ago. The report cited Wong Kai Song, Shin Yang group executive director, plywood division, as saying that Japan’s increased new housing starts this year are also spurring demand for imported panel products.

He said the average plywood price for the Japanese market had gone up by about 15% to US$550 (RM1,672) per cu m in the first quarter (1Q) against last year’s 1Q, thanks to stronger demand. He said there is another 5% to 10% upside potential in the price, expecting the growth in export volume to Japan to be sustained this year.

With the improving prices, Ta Ann might be able to minimise its losses from the Tasmania veneer manufacturing operation. But the company would still continue to be hampered by its operational issues at the Tasmania facility, including high operating costs.
Jaya Tiasa’s exports are more spread out, with exports to markets such as the US (where housing starts are also picking up), India, South Korea and Taiwan.

Any significant recovery in the timber sector is still in doubt in the near and medium term. We remain optimistic about Jaya Tiasa and Ta Ann’s oil palm PLANTATION [] operations. Against that backdrop, we maintain our “hold” calls on the stocks due to the heightened risks in both the timber and oil palm sectors. — AmResearch, April 16

This article first appeared in The Edge Financial Daily, on April 17, 2013.