The following is an extract from RHB’s article of 17th June 2014 quote: We believe palm oil should start trading higher, especially after its price has recovered above the MYR2,400 level. The current hot and dry spell in Malaysia, due to the southwest monsoon that is expected to persist until September, will hurt palm oil production – much like in Jan-Feb this year. Also, tensions in Iraq are boosting crude oil prices and biodiesel margins, which will increase demand. Maintain OVERWEIGHT.
If you study the above table carefully you will notice that Jaya Tiasa has the best profit growth rate. Its P/E ratio for 2014 and 2015 are 15.5 and 11.4. Moreover, its EV/ha is about the cheapest.
After having read this RHB’s article, I realize that I have to write this article to correct the wrong impression which I may have given at my recent investment seminar on 1st June.
During the seminar I said that no share could continuously to go up or come down for whatever reasons and we must take advantage of this phenomenon to make money. I said as an example, Jaya Tiasa, had gone up about 30% from Rm 2.10 to Rm 2.72 in the last 5 months. I sold some to take some profit and to reduce my margin loan. I also said that you could always back Jaya Tiasa when it was cheaper.
Now is the best time to buy back Jaya Tiasa. - by Mr. Koon Yew Yin
The price has gone up 30% from 2.10 to 2.70 for the last 5 months. Now the it swings at 2.50 while all people were frightened because Mr. Koon said he was selling it. Actually selling part of it because he want to lower his margin for safety issue as the price has gone up.
Every signs Jtiasa shows was good except the high gearing debt and cashless position. So, this is a bit risky? Warren Buffet said never lose your money. The very important condition for me to buy a stock after all the filtering is CHEAP. The cheapest price you bought among all people in the market let you stand firm and less risk.
Last 6 years Jtiasa was aggressively planting oil palm, and now Jtiasa was building oil mill. Everything is good but waiting El-nino to come and the CPO price to re-bounce seasonally.
Assume the price can go to RM3000 per tonne from RM2300, and Jtiasa CPO produced can get 10000 metric tonnes instead of 6000mT. It can make RM15mil more and RM4mil was contributed by the CPO price alone, and this is monthly!
Another important thing was the business type of the stock, which was unique and commonly being used by majority of people, palm oil. And this was going to be more and more useful when bio-diesel going to be implemented. What WB bought was Coca-cola, Wells Fargo bank, American Express, Walmart and etc.
17 SEP '14 (update): As the CPO price dropped to a 5 years low, JTIASA also dropped to 2.04 the lowest in pass 1 year. However, the production yield was keep increasing and remember the age of the palm was so young and expected to product more fruits.
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