Possible Bottom Fishing: JTIASA (4383)

Hi Readers,

I was reading the statistics published by Department of Statistics Malaysia for the month of August 2019 over the weekends and the summary of exports extracted as below. Overall exports were down but there were increases notably in the areas of palm oil & palm oil-based products and timber/timber-based products. Hence, that led me to drill into JTIASA (4383). 

Extracted from DOSM website:

On a month-on-month basis, in August 2019, the export unit value index recorded a marginal decline of 0.1% to 115.3 points which was mainly attributed to the decrease in the index of manufactured goods (-0.8%), inedible crude materials (-0.5%) and chemicals (-0.2%). Meanwhile, the export volume index also recorded the same trend with a drop of 7.5% to 132.6 points. The drop was led by the decrease in the index of machinery & transport equipment (-16.0%), mineral fuels (-10.5%) and inedible crude materials (-8.1%). In seasonally adjusted terms, the export volume index decreased 10.6% to 128.3 points.

When compared to the previous year, both the export unit value and volume indices declined 0.1% and 0.6% respectively.

Additional details extracted from TheSunDaily:

However, increases were recorded for palm oil and palm oil-based products (+RM844.3 million); refined petroleum products (+RM349.6 million); timber and timber-based products (+RM34.5 million); and natural rubber (+RM12.6 million).

For your information: Jaya Tiasa Holdings Bhd is an investment holding company, operates as a timber producer in Malaysia. Business activity of the group is breakdown into various segments which include logs trading, manufacturing, oil palm, and others. Through its subsidiaries, the company manufactures a product such as sawn timber, blockboard, plywood, veneer and related products which are sold in the market of Asia Pacific, Middle East, Europe and Latin America. In addition, the firm also provides air transportation services and it is further engaged in the development of oil palm plantations.

The nature of JTIASA business is related to the details extracted from DOSM and TheSunDaily; specifically in the areas of exports. Will there be opportunity to trade JTIASA in coming months?

Fundamentally, I need to validate the palm oil and timber business for JTIASA to ensure that it is contributing to the exports index in Aug'19 as published by DOSM. With that, I have extracted some of the facts from its recent corporate presentations as shown in Image 1 and also month to month production figures from 2018 until cum to date as shown in Image 2.

Image 1: Extracted from JTIASA recent corporate presentation

Image 2: JTIASA Monthly Production Figures Published from 2018 to cum to date

Looking at Image 1, JTIASA's palm oil sector will contribute significantly to its revenue and the strategy put in place in terms of plantation showing it has high percentage of prime mature palm oil trees that has high ffb yield. Jul to Sep monthly production figures is also showing higher output and it will be interesting to see how it contributes towards its bottom line.

Technically, there is an opportunity for bottom fishing as shown in Image 3. To do so, I have also included comparison between its share price movement correlating to FBMPALMOIL Index (orange line chart) and FCPO (blue line chart). 

Image 3: Comparison between JTIASA and FBMPALMOIL INDEX and FCPO futures price

From the chart, there is strong correlation of its share price with FBMPALMOIL Index. It is also good to note that there is a slight gap between the index and FCPO price. From the share price perspective, JTIASA is currently near its support of $0.43 cents and immediate resistance at $0.65 cents. Will JTIASA starts its rounding bottom move towards $0.65 cents? With that, there are several trade setups that can be considered for JTIASA (4383) as shown below:

1. Aggressive traders:
• Entry: $0.47 +/- 3%
• Stop Loss: Price closes below $0.43
• Exit: According to your own rate of returns or the levels in Image 3
• Remarks: JTIASA next QR (Q1'20) is estimated to be released by end of Nov'19. Hence, it is recommended to observe the next two monthly production figures. A slower production figures in Oct and Nov may impact its Q2'20 QR but not its upcoming QR.
2. Conservative traders:
• Entry: $0.43 +/- 3%
• Stop Loss: Price closes below $0.415
• Exit: According to your own rate of returns or the levels in Image 3
• Remarks: One can also choose to enter upon confirmation of reversals if it goes down below $0.43 cents and wait for it to go above $0.43 cents again. 

Good luck and all the best!!!

Disclosure: The information above is for sharing purposes without any understanding of investment targets and needs of readers. References to the price movements is informational based on my analysis and data obtained from sources believed to be reliable at the point of writing. Please do your own due diligence as this article is not a recommendation to buy/sell.