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Koon Yew Yin On Jaya Tiasa

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Dear XXXXX (a senior analyst),

I attached herewith JayaTiasa Chairman's opening statement for its annual report for year ending June 2012. The following are my comment:

1. It has one of the largest, if not the largest plywood and logging business in Malaysia

2. The started planting oil palms in 2002 aggressively and the report showed that it had planted nearly 60,000 ha. Looking at the age profile and FFB/ha production at various palm ages, this company has sustainable profit growth for the next 10 or more years. 

3. Just before the bonus issue of 2 for everyone held, the share price was nearly Rm 10 and the company placed out 15% of the total issued shares at Rm 7.90. After the bonus issue, the financial institution would have paid Rm 2.63 per share and it closed at Rm 2.09 yesterday. 

4. Reforestation or replanting trees is viable long term business. Please see the 2 attachments. The company must have spent quite a large amount for planting trees. As a result the NTA is more than RM 4.00 per share. 

I wrote to the company secretary to enquire why the Chairman said that the trees will take 12-15 years to grow while according these attached reports the trees can be harvested in about 7 years. She replied that they need the trees to have a minimum of 35 cm diameter for the production of veneer. For chip boards manufacture the trees can be any size. 

5. I like the way they keeping planting oil palms aggressively. They planted about 60,000 ha in 10 years. I expect to see more planted area in its annual report for year ending June 2013. 

I have been buying this share for the last few months and there were lots of sellers because the company is currently showing poor profit. I think I have mopped up all the tired holders' shares. I am beginning to find less sellers. My family members and I have accumulated more than 23 million shares. 

I have not seen any analyst report on Jaya Tiasa? Why are you not interested in this share with sustainable profit growth in the next 10 years? 

I consider this is the most undervalued plantation share in the market. Fortunately or unfortunately it is not listed under plantation and that is why it is not so obvious and glaring at investors. 

Best wishes
Yew Yin          
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Just Out - report On JT by CIMB
Jaya Tiasa Holdings   | PDF
Beneficiary of higher log prices
JT MK / JTIA.KL | TRADING BUY - Maintained | RM2.00 - Tgt. RM2.36
Mkt.Cap: US$608.00m | Avg.Daily Vol: US$0.52m | Free Float: 38.50%
Plantations | Author(s): Xiao Jun SAW,
? Our more positive view on Jaya Tiasa's timber business was reinforced during a recent non-deal roadshow with the group. Management thinks that the higher log prices could last till March next year. This will lift timber earnings of the group in the coming quarters. We maintain our Trading Buy call on Jaya Tiasa. The stock is not an Outperform as we expect it to be re-rated only in the short term, driven mainly by stronger timber earnings in the next few quarters. Also unchanged are our earnings forecasts and our target price of RM2.36, which is based on sum-of-parts. Key re-rating catalysts include a potential positive earnings surprise relative to consensus.
 
What Happened
We took Jaya Tiasa's CEO and senior management team on a one-day NDR in Kuala Lumpur last week to meet with 11 institutional funds. During the meetings, management provided updates on its plantation and timber divisions. Most investors were keen to know whether the current strong log prices were sustainable as they were concerned that the recent decline in the rupee against the US$ may impact future timber demand from India. Management indicated that demand for Sarawak logs from India is fairly inelastic given the country�s preference for Sarawak logs, which are comprised mainly of the Meranti species. The group believes the current high log prices will be sustained until March next year as it expects log supply to remain tight given that the rainy season in Sarawak is due to start in September. The group also expects plywood prices to trend higher in 2H13, driven by improved housing activities in Japan and the impending imposition of anti-dumping duties on Chinese plywood that are made from hardwood by the US in Sep 13. 
 
What We Think
Management broadly concurs with our view that current log prices could stay high till the end of the year and that plywood prices could rise as a result of stronger housing activity in Japan. We expect Jaya Tiasa to report better timber earnings in its 4QFY13 this coming Aug due to higher selling prices for its logs. We also expect the higher plywood prices to further boost its timber profitability in FY14. 
 
What You Should Do
We believe there is upside to its current share price as the rising timber prices have not been fully appreciated by the market. 

Websites I Frequent Most

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Internet radio is a blast ... and one of the best free sites is SHOUTCAST, whatever your fancy. Mine is always tuned to JAZZ category, sub category VOCAL, and my favourite station is The Penthouse (nothing to do with the magazine ... errr, I think), I think I should have been born in the 40-50s.

http://www.shoutcast.com/
http://www.shoutcast.com/radio/Vocal%20Jazz


Needless to say, one of the best daily papers. The biz section is actually very much Dealbook.
New York Times
http://www.nytimes.com/


Next favourite online paper.


http://www.smh.com.au/


Best site for soccer highlights as I will always miss the games.

http://www.soccer-blogger.com/

A most wonderful site to watch the many incredible works, all the conspiracy theories, real life re-enactment stories, thorough analytical pieces on important issues.
FreeDocumentaries.org
http://www.freedocumentaries.org/

My go to site to learn more about fine wines and cigars.

http://www.jamessuckling.com/asia-hong-kong/
http://www.jamessuckling.com/cigars/

A great time waster, not really, ... great site for the humanities and social sciences put together in a very attention grabbing way.
TwistedSifter Logo
http://twistedsifter.com/

Christianity based magazine, but you wouldn't know it from the way they lay out the content. Excellent articles on life issues and living well without sounding preachy.

http://www.relevantmagazine.com/

Easily the best food site for home cooks, Malaysians & Singaporeans in particular. 
The Food Canon - Inspiring Home Cooks
http://www.foodcanon.com/

Revolutionary and evolutionary ideas and discussions, a bit high brow and academic at times but worth a visit a month.

http://bigthink.com/



S&M Show Wednesday Podcast

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The Unbearable Lightness of Being Syed Mokhtar ... Ewein ... etc..

http://www.bfm.my/snm-show.html

Song pick: Ballroom Blitz by The Sweet

Politics & Business In Myanmar 2013

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The phlegmatic government (you can try to get rid of the booger from your fingers but it just sticks around) of Myanmar just announced a shocking awardment of foreign telco licenses to build 4G networks in Myanmar. The winners of the 15 year concession were Telenor from Norway (DIGI fame) and Ooredoo from Qatar.

What was shocking was the favourites did not get a mention. SingTel which was easily the hot favourite did not get it. SingTel was bidding as part of a consortium with Myanmar's biggest bank Kanbawza Bank. SingTel with a large footprint in emerging markets, backed by Temasek, not to mention being buddies in  ASEAN loose coalition of neighbours to boot.



It would appear that there are other concerns in the awardment of the concessions. The messages are loud and clear. One, Myanmar still regards ASEAN as not the most important grouping as the memebrs try to make it out to be. Suffice to say, Myanmar has had lingering political issues that earned the ire of many foreign countries. Be it Aung San Sukyi or the dastardly acts towards the Rohingyas. It appears you cannot EVEN say anything negative or try to interfere in any way, even by political suasian or closed door sessions. A hands off and mouth zipped policies are valued.

The other favourite was a consortium led by Digicel, a Jamaica based telco that first invested in Myanmar in 2009 and employs close to 900 people in the country. The consortium also included Goerge Soros and Seung Pun, a leading business insider in the country. This was supposed to be a shoo-in. But no.

Again, that may have a message to George Soros, an advocate of democracy and supporter of many private efforts via NGOs globally. If you want to do big business in Myanmar, be apolitical.Any country that supports sanctions etc... will be "punished".

Ooredoo was ranked 9th out of 11 bids and was unlikely given the tension with anti-Islam violence with the Rohingyas, as the company was Qatari. Still, Ooredoo is 67% owned by Qatar government and provides telco services in Indonesia, Singapore, Laos and the Philippines. It supposedly has over 60mn customers in Indonesia alone. 

Telenor can better explain its cause as it has Norway government support. Plus the Norway government has been one of the more active European countries in Myanmar, supporting and funding various projects in the country.

So, it could be political ... or it could also be corruption. Who knows? It certainly did not look to be fully on merit alone. Though Telenor could win by merit alone as well. Too many questions, the perils of doing business with government. 

Stocks To Watch

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Some of you may wonder how is the Murasaki ts system doing. Our subscriber base has been growing  well. The early months were choppy as people did not fully understand how to use the system. Now we are getting back many of our trial users to our Masterclasses (which are free). The weekly crowd is good and its getting to be a big social event and sharing of investing ideas. Below are two examples of how we use the system to pick early movers.


This screenshot was taken at 12.34pm Friday 28 June for LB Aluminum. FQR, M, Live MFI and BRH are our proprietary data. FQR is a measure of the fundamentals based on last 4 quarters. M is the energy index or Murasaki index. If a stock is behaving normally, it should register an M of around 100 or below. If its 400, it means it is 4x abnormal behaviour. 

The bottom right is the last 5 days data on M, MFI and BRH. As you can see, the M index was behaving itself for most of the past 5 days except yesterday, the 1,323 was a big anomaly which was accompanied by a positive uptick in price. Its a signal that let us confirm it is an early mover. It may not go up every day after that, but at least we know the engine has been started. Hence LB Aluminum is a good trade for a 1-15 day period.

The second stock highlighted is Ewein. Again, just by looking at the last 5 day pattern, you can already confirm 3 days back that something is up. The M energy continued, accompanied by positive upticks. As it is still well below the 1,000-2,000 reading on the M, you can conclude that it is early days still. Once it gets very speculative where day traders get in, the M will usually go into the few thousand category.

The other important indicator is the MFI or money flow index. The system is about the only one that has a live MFI. Others usually calculate MFI only at end of day. MFI gives an important read on the status of smart money residing in the stock. If the figure is steady or rising, one can safely continue to hold onto the stock. Once it starts dropping (more than 2%-3% points from the week's high MFI), you can basically conclude the smart money has exited and so should you.

Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Take Off The Collars

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A fellow business blogger David Koay put this up his blog. Its a remarkable video. One that must be watched by all, especially our leaders. Even though I knew how the whole thing would turn out, it still made my eyes well up because it is so easy to have racism and discrimination instilled in us knowingly and unknowingly. Its powerful too. Kudos to the great teacher Jane Elliot.

Ms. Jane Elliott's "brown eyes, blue eyes" experiment in 1970 (the third one after her first in 1968). This "Eye of Storm" documentary was made by William Peters in 1970 for ABC News and later included in the documentary "A Class Divided" (1985), which included a class reunion (of 1984.)


Why Mining SPACs - Important

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If you have listened to the S&M show you will have some idea of what I am talking about. The points I am trying to make:

a) why all oil & gas SPACs, the SC is sending out the wrong signals, telling the markets that they only like oil & gas sector

b) the SC has to be careful as it appears to be blurring the lines of approving based on ability and approving based on personalities

c) it is not SC's task to pick the sectors, you can put in the stringent requirements but not sector picking

We have a huge sector that has been largely ignored by EPU, the Capital Markets masterplan. Why:

1) there is no regional financial center to list regional mining stocks

2) Malaysia's vibrant equity markets have not be proactive to make it the center in terms of fund raising, listing, PE mining centric firms, primary greenfields investing, secondary investing, using of Syariah compliant instruments to promote the sector

3) the ring of fire, we are on a volcanic activity plate which also yields a lot of minerals in the region, including Laos, Vietnam, Cambodia and Malaysia ... though the mines may be smaller, they are still very much viable


4) imagine listing 2-3 mining stocks a year ... 5 years later we have 15 and there will be a vibrant equity market supporting the prospecters, early investors, even fund management and private equity

What we have now are viable mines having to go the long way to get listed or even tapping the capital markets. Why are they not listing on Bursa? There are plenty of local entrepreneurs, having to go the hard way... we are again losing talent, earnings, taxes and other multiplier effects. The following are Malaysian mines currently listed overseas and the market cap:

Gindalbie Metals / ASX / USD340m (RM1.08bn)
Avalon Materials / ASX / USD 30m  (RM96m)
LionGold / SGX / USD880m (RM2.8bn)
Golden West / ASX / USD37m (RM118m)
Peninsular Gold / AIM / USD22m (RM70m)
Besra / TSX / USD 32m (R102m)
CVM Minerals / HKG / USD40m (RM126m)
Monument Mining / TSX / USD103m (RM330m)
CNMC / SES / USD107m (RM342m)

They all could have and should be listed on Bursa!!!


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