JPG: Plantation Group Exceeds Expectations with Robust Full-Year Performance

A recent research report indicates that a prominent plantation group has reported full-year 2025 earnings that significantly surpassed both analyst and consensus estimates. This strong financial performance was primarily driven by exceptional cost management and higher interest income, leading to a maintained “BUY” rating and an upward revision of its target price.

Performance Review

The group’s core profit for the fourth quarter of 2025 saw a healthy increase of 1.2% quarter-on-quarter and 9.8% year-on-year. This contributed to a full-year core earnings figure of MYR345 million, marking a substantial 30% increase from the previous year. This impressive result exceeded forecasts, accounting for 108-116% of full-year expectations. The positive deviation was largely attributable to lower-than-anticipated interest expense and an effective tax rate, coupled with improved interest income. In line with its robust performance, the group also declared a 3 sen dividend per share for 4Q25, bringing the total FY25 dividend to 7 sen, representing a 50% core payout ratio.

While Fresh Fruit Bunch (FFB) output experienced a 4% quarter-on-quarter drop, resulting in a flat full-year output, the group’s CPO Average Selling Prices (ASPs) for FY25 recorded MYR4,480 per tonne, a 3.4% year-on-year increase and a 4% premium over the Malaysian Palm Oil Board (MPOB) price. Strong ESG credentials were cited as a contributing factor to these higher ASPs.

Conversely, CPO unit costs saw a slight increase of 3.2% year-on-year to MYR2,312 per tonne in FY25, primarily attributed to weaker output. This trend is expected to continue, with forecasts indicating a further 5% rise in FY26 due to anticipated flat output and higher fertiliser costs, which have already been fully secured for FY26 at prices 10% above the previous year.

Future Outlook and Strategic Initiatives

Looking ahead, management projects FFB output to remain flat in FY26, despite ongoing accelerated replanting efforts. CPO output growth is targeted for single-digits. A key strategic initiative, the integrated refinery, is progressing well and is expected to be completed in 2Q26, ahead of its initial 3Q26 schedule. Although this involves a higher capital expenditure of MYR600 million, topline contributions from the refinery are anticipated to commence from 3Q26, with expectations for breakeven profit.

Analysts have consequently lifted their FY26F-27F earnings forecasts by 5.6% and 13.5%, respectively. A new FY28 forecast has also been introduced, factoring in reduced interest expense, higher interest income, and anticipated contributions from downstream operations.

Recommendation

Analysts maintain a “BUY” recommendation for the company, raising the target price to MYR1.90 from MYR1.85. This revised target price, representing a 25% upside and based on a 15x 2026F P/E, is considered warranted given the company’s strong ESG profile, which positions it at the upper end of its peers’ valuation range of 11-15x.