$JTIASA / 4383 (JAYA TIASA HOLDINGS BHD) - Disappointing Profit Numbers Hides Improving Operational Performance

Typically Calendar year Q1 is the low season, and you can check and compare most plantations to see this trend. I've also mentioned this many times over the past months, so I hoped nobody was taken by surprise at the "bad" quarter. In fact, plantation companies release their production numbers every month via announcement on Bursa, so for those following the plantation sector I believe we must at bare minimum keep track of these numbers.

For the record, Jtiasa produced ~216.8k tons of FFB and 41.7k tons of CPO with a below average OER of 18.6%.

YoY, they have improved quite a bit from 190.3k tons of FFB and 36k tons of CPO in 2023, and the improvements become even more apparent if we compare it to 2022 where they only produced 151.2k tons of FFB and 25.9k tons of CPO.

When tracking plantations, bottomline profit numbers by themselves can often be very misleading as they are very heavily dependent on the underlying commodity; but only by digging more into the operational numbers can we see how a company is improving or not.

Anyhow, with that out of the way, let's quickly just go through the QR and what I think stand out to me.

1. Gross Profit hits RM 36mil, with GPM of about 17%. They knock off another 3mil on the fair value of their biological assets. Meanwhile, in spite of the lower revenue, they had incurred higher administrative expenses. This could be due to multiple reasons, but it's generally not a good thing. That being said, it's not unheard of for staff bonuses and the like to be given during Q1 (especially like CNY ang pao and so on), so as long as the number doesn't balloon, I wouldn't immediately raise any flags yet. It's also worth nothing that Jtiasa has frequently mentioned that they are increasing manpower to improve harvests, and this rising expense could simply just be part of that. (They have improved their manpower from 50%, 75%, and now close to 90% of their required manpower according to the AGM).

2. In this Qtr, Jtiasa had written down their goodwill, amounting to around ~RM 11.6mil. Their investment securities seem to be doing somewhat well, and I believe this is from their shares in $RSAWIT / 5113 (RIMBUNAN SAWIT BERHAD) back in 2015. I'm not sure when they will sell their shares, if ever.

3. C&CE stands at RM 270.3mil, vs debt of RM 56.3+185.9 = RM 242.2mil. Net cash position stands at RM 28.1 mil, which is a ~RM 12mil increase QoQ in spite of paying out an additional ~RM 24mil of dividends. This is good.

4. In 3Q, their NOCF hits RM 282.2mil, increasing by RM 54mil qoq, while they spent around RM 18mil on capex, thus leading FCF this qtr at around RM RM 36mil. Cumulatively, the FCF generated this 9M is close to RM 190mil, including the acquisition of their subsidiary. Not bad at all. They have also continued to pare down their debt, which should provide interest savings over time.

5. A few people angrily highlight the purchase of aircraft and motor vehicles, and asked me whether this is a misappropriation of company funds and compare it with another company who also recently bought a private jet for RM 200+mil. Coming from the plantation industry, it is very normal to have a small plane or two (even small ships sometimes) as most of the time the estates are located in very rural and hard to access areas, and for the management (whom are mostly quite senior people) to visit the estates and mills, it's not reasonable to expect them to sleep in the jungles and go through a 20-30 hour ride by 4x4 just for a single visit. So, this is a non issue to me.

6. With having passed low season now, Jtiasa's management expects to have gradual output recovery and this is in line with most players as well.


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So far, operationally Jtiasa has shown continued improvement yoy and the management under the new CEO seems to be walking the talk. Cash flow has been great, and the final mark will be to see how generous the company will be in distributing dividends come August above the 20% payout policy they have in light of their improved financial position.