JPG: Plantation Sector Delivers Robust Earnings on Cost Control and Premium Sales, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 |
| Last Traded | RM0.20 |
| Recommendation |
A leading plantation group has announced a robust financial performance for the fiscal year ending December 2025 (FY25), with net profit significantly exceeding expectations. The strong results were primarily driven by diligent cost management, particularly lower fertiliser expenses, and the realization of higher premium prices for its certified sustainable palm oil products.
Performance Review
The group’s net profit for FY25 surged by a notable 34.1% to RM345 million. This performance was in line with the investment bank’s forecast but surpassed the market consensus by 8%. A key factor contributing to this uplift was the average CPO price realised, which increased by 3.4% year-on-year to RM4,480 per tonne. Furthermore, the group benefited from a substantial premium of RM148 per tonne for its RSPO-certified palm oil, an increase from RM119 per tonne in FY24. These gains were partially offset by a softer fourth quarter (4QFY25), which saw a quarter-on-quarter decline in Fresh Fruit Bunch (FFB) production and CPO prices.
For FY25, the group declared a total gross dividend per share (DPS) of 7 sen, an increase from 5.3 sen in FY24, including a 3 sen DPS for 4QFY25.
Future Outlook and Investment Rating
Looking ahead, the group is set to enhance its operational capabilities with the commencement of its 51%-owned palm refinery in Johor, anticipated in 3QFY26. While initial earnings contribution from the refinery is expected to be minimal, the investment bank has revised its FY26F net profit forecast upwards by 4.5%, primarily due to higher projected palm kernel prices and FFB purchases. The bank forecasts a gross DPS of 7.5 sen for FY26F, representing an attractive yield of 4.9%.
The investment bank has reiterated its “BUY” recommendation for the group, raising its target price from RM2.00 to RM2.08 per share. This revised target price implies a potential upside of 36.8% from the current trading price, based on a FY26F Price-to-Earnings (PE) multiple of 15x, consistent with comparable plantation firms. The bank highlights the group’s strategic positioning in Johor and its pure exposure to CPO prices as key investment merits, further supported by the positive demand for sustainable certified palm products, which allows the group to secure premium selling prices.
Potential risks identified include a downturn in CPO prices and an increase in crucial operational costs such as fertiliser and wages.
