JOHOR PLANTATIONS
(JPG MK EQUITY, JPG.KL)
(Maintained)
Strong demand for RSPO-certified products
gan-huey-ling@ambankgroup.com
03-2036 2305
| Price | RM1.34 |
| Target Price | RM1.72 |
| 52-week High/Low | RM1.47/RM0.85 |
Key Changes
| Target Price | ▲ |
| EPS | ▲ |
Financial Forecasts
| YE to Dec | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|
| Revenue (RMmil) | 1,524.9 | 1,561.3 | 1,604.7 | 1,609.9 |
| Net Profit (RMmil) | 257.3 | 285.1 | 287.2 | 289.4 |
| EPS (sen) | 10.3 | 11.4 | 11.5 | 11.6 |
| EPS growth (%) | 53.8 | 10.8 | 0.8 | 0.7 |
| Consensus net (RMmil) | 276.6 | 259.2 | 253.4 | |
| DPS (sen) | 5.3 | 5.5 | 6.0 | 6.3 |
| PE (x) | 13.0 | 11.8 | 11.7 | 11.6 |
| EV/EBITDA (x) | 8.7 | 8.4 | 8.2 | 7.9 |
| Div yield (%) | 3.9 | 4.1 | 4.5 | 4.7 |
| ROE (%) | 10.2 | 9.9 | 9.5 | 9.1 |
| Net gearing (%) | 37.3 | 36.7 | 33.9 | 31.3 |
Stock and Financial Data
| Shares Outstanding (million) | 2,500.0 |
| Market Cap (RMmil) | 3,350.0 |
| Book Value (RM/Share) | 1.13 |
| P/BV (X) | 1.2 |
| ROE (%) | 10.2 |
| Net Gearing (%) | 37.3 |
Major Shareholders
Johor Corporation (65.0%)
EPF (11.4%)
Free Float
45.0
Avg Daily Value (RMmil)
4.5
Price performance
| 3mth | 6mth | 12mth | |
|---|---|---|---|
| Absolute (%) | +0.1 | +3.3 | +44.8 |
| Relative (%) | +7.4 | +6.2 | +48.0 |
Investment Highlights
Johor Plantations Group (JPG) reported a decent set of 1HFY25 results. The group’s net profit climbed by 51.6% YoY to RM151.1mil in 1HFY25 underpinned by higher palm product prices and lower fertiliser costs. In spite of a 12.8% QoQ fall in CPO price in 2QFY25, JPG managed to sustain its net profit at RM75.2mil due to a 30.2% surge in the sales volume of CPO. Average CPO price slid to RM4,331/tonne in 2QFY25 from RM4,969/tonne in 1QFY25. We maintain BUY with a target price of RM1.72/share as we like JPG for its pure exposure to CPO prices and premium selling prices.
- BUY at a higher TP of RM1.72/share (vs. RM1.67/share previously). We derived JPG’s TP of RM1.72/share by applying a of 15x on FY26F EPS of 11.5 sen The PE of 15x is the multiple that we used to value Genting Plantations (GenP). We believe that JPG should trade at the same PE as GenP due to its high leverage to CPO prices, and strategic location of its oil palm estates in Johor.
- JPG’s 1HFY25 net profit of RM151.1mil was 6% above our forecast and 5% above consensus. The group’s results exceeded our expectations due to a higher-than-expected gross profit margin and lower-than-estimated interest expense. We have raised JPG’s FY25F net profit by 4.4% to account for this.
- Large RSPO premium. JPG’s selling price of RM4,605/tonne in 1HFY25 (1HFY24: RM4,144/tonne) was RM215/tonne higher than MPOB’s average spot price of RM4,390/tonne. This is due to strong demand for RSPO-certified palm products. We expect demand for Identity Preserved RSPO-certified palm products to remain healthy as the EUDR will be implemented on 30 December 2025.
- FFB production slid by 7.8% YoY in 1HFY25. This was due to the floods in 1QFY25, which affected harvesting. Since then, FFB output has recovered. JPG’s FFB production climbed by 25% QoQ in 2QFY25. We expect the group’s FFB output to achieve the highest level in August or September.
Company profile
Johor Plantations Group (JPG) is involved in the upstream segment of the palm oil supply chain. Going forward, the group plans to venture into palm refining. Construction of the refinery started in FY24 and is expected to be completed in 2HFY26.
JPG’s earnings are from the sale of palm products.
JPG’s customers are refineries in Johor, which include Intercontinental Specialty Fats, Palmaju Edible Oils and PGEO Group.
JPG’s operations are mainly in Johor.
JPG’s competitive advantage lies in the strategic location of its estates in Johor and Identity Preserved (IP) RSPO- certification of its palm products. Due to the surge in land prices in Johor, JPG’s estates are worth more than their book values. The IP certification allows the group to sell CPO at a RM100/tonne to RM250/tonne premium above MPOB prices.
Investment thesis and catalysts
We have a BUY on JPG as it would benefit from resilient CPO prices.
Share price catalysts are a jump in CPO prices and plantation earnings. We think that an acquisition or disposal of land would also be a share price kicker.
Valuation methodology
We applied a PE of 15x on JPG’s FY26F EPS to arrive at its TP of RM1.72/share. The PE of 15x is the same PE that we have applied to arrive at Genting Plantations’ (GenP) fair value. We believe that JPG deserves to trade at the same PE as GenP due to its premium selling prices and high leverage to CPO prices.
Risk factors
Key risks are a fall in CPO prices and rise in costs of fertiliser and wages.
A fall of RM100/tonne in CPO price would affect JPG’s net profit by 5% to 7% assuming everything else remains constant.
EXHIBIT 1: VALUATIONS
| Target PE (x) | 15 |
| FY26F EPS (sen) | 11.5 |
| ESG premium | – |
| 12-month target price (RM) | 1.72 |
EXHIBIT 2: EARNINGS SUMMARY
| YE 31 Dec (RMm) | 1HFY24 | 1HFY25 | % YoY | 1QFY25 | 2QFY25 | % QoQ |
|---|---|---|---|---|---|---|
| Turnover | 655.8 | 738.7 | 12.6 | 340.4 | 398.3 | 17.0 |
| Cost of sales | (442.5) | (470.8) | 6.4 | (213.9) | (256.9) | 20.1 |
| Gross profit | 213.4 | 268.0 | 25.6 | 126.6 | 141.4 | 11.7 |
| Other income | 22.8 | 16.4 | (27.8) | 8.6 | 7.8 | (9.6) |
| Admin expenses | (75.3) | (60.6) | (19.5) | (28.3) | (32.3) | 13.9 |
| Other expenses | (0.5) | (0.1) | (76.5) | (0.1) | (0.0) | (84.7) |
| Finance income | 1.8 | 8.2 | 4.8 | 3.4 | ||
| Finance costs | (33.4) | (25.8) | (22.7) | (13.2) | (12.6) | |
| Pre-tax profit | 128.7 | 206.1 | 60.1 | 98.4 | 107.8 | 9.6 |
| Tax | (26.9) | (51.6) | 91.5 | (21.9) | (29.7) | 35.8 |
| Zakat | (2.0) | (3.9) | (1.2) | (2.7) | ||
| Minority interests | (0.1) | 0.5 | 0.7 | (0.2) | ||
| Net profit | 99.7 | 151.1 | 51.6 | 75.9 | 75.2 | (1.0) |
| EPS | 4.9 | 6.0 | 3.1 | 3.0 | ||
| DPS | 1.3 | 2.3 | 1.0 | 1.3 | ||
| Gross profit margin | 32.5 | 36.3 | 37.2 | 35.5 | ||
| Effective tax rate | 20.9 | 25.0 | 22.2 | 27.6 | ||
| FFB production (tonnes) | 514,456 | 474,140 | (7.8) | 210,709 | 263,431 | 25.0 |
| CPO price (RM/tonne) | 4,144 | 4,605 | 11.1 | 4,969 | 4,331 | (12.8) |
EXHIBIT 3: CHANGE IN EARNINGS
| RMmil | FY25F | FY26F | FY27F | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Old | New | % | Old | New | % | Old | New | % | |
| Revenue | 1,561.3 | 1,561.3 | 0.0 | 1,650.7 | 1604.7 | -2.8 | 1,661.4 | 1609.9 | (3.1) |
| Net earnings | 273.2 | 285.1 | 4.4 | 277.5 | 287.2 | 3.5 | 280.0 | 289.4 | 3.4 |
EXHIBIT 4: ESG MATRIX
| Assessment | Parameters | Weightage | Rating | Rationale | |
|---|---|---|---|---|---|
| Environmental assessment | |||||
| 1 | RSPO certification | 100% certification | 25% | * * * | All of JPG’s estates and mills are RSPO-certified; 14% of smallholders were RSPO-certified in FY24 vs. 12% in FY23 |
| 2 | Supply chain auditing | 100% traceable | 25% | * * * | 94% traceable to plantation and 74.9% traceable to external suppliers’ plantations in FY24 |
| 3 | Fires | Zero incidences | 25% | * * * | One in FY24, same as FY23 |
| 4 | GHG emissions | Reduce carbon footprint by 50% in 2025F from 2012’s levels and achieve net zero by 2050F | 25% | * * * | Carbon emissions intensity was 0.9/tCO2e in FY24 vs. 1.8/tCO2e in FY23 |
| Weighted score for environmental assessment | 100% | * * * | |||
| Social assessment | |||||
| 1 | Migrant workers welfare | Number of Workers grievances | 40% | * * * | 12 cases in FY24 vs. 5 in FY23 |
| 2 | Work site safety | Zero fatal fatalities | 30% | * * * | 30 hours in FY24 vs. 27 in FY23 |
| 3 | Lost Time Injury Frequency | Below 5 | 30% | * * * | 1.9 in FY24 vs. 1.4 in FY23 |
| Weighted score for social assessment | 100% | * * * | |||
| Governance assessment | |||||
| 1 | Related party transactions | Value of RPTs | 40% | * * * | RM11mil in FY24, comprising mainly rental of estates from Jcorp |
| 2 | Women in workforce | % in workforce | 30% | * * * | 12% of permanent employees were women in FY24, same as FY23 |
| 3 | Remuneration to directors | Total value of remuneration or % of salary costs | 30% | * * * | RM3.4mil in FY24 vs. RM2.3mil in FY23 |
| Weighted score for governance assessment | 100% | * * * | |||
| Overall Score | |||||
| Environmental score | 50% | * * * | |||
| Social score | 30% | * * * | |||
| Governance score | 20% | * * * | |||
| Overall ESG Score | 100% | * * * | |||
EXHIBIT 5: FINANCIAL DATA
Income Statement (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Revenue | 1,253.4 | 1,524.9 | 1,561.3 | 1,604.7 | 1,609.9 |
| EBITDA | 368.4 | 507.2 | 525.8 | 539.9 | 548.8 |
| Depreciation | (108.7) | (119.6) | (123.0) | (127.5) | (133.5) |
| Operating income (EBIT) | 259.7 | 387.5 | 402.8 | 412.4 | 415.3 |
| Other income & associates | 15.0 | 25.2 | 20.0 | 20.0 | 20.0 |
| Net interest | (87.8) | (66.5) | (43.0) | (49.7) | (49.8) |
| Exceptional items | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Pretax profit | 186.9 | 346.2 | 379.8 | 382.7 | 385.5 |
| Taxation | (21.2) | (90.2) | (95.0) | (95.7) | (96.4) |
| Minorities/pref dividends | 1.6 | 1.3 | 0.2 | 0.2 | 0.2 |
| Net profit | 167.3 | 257.3 | 285.1 | 287.2 | 289.4 |
Balance Sheet (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Fixed assets | 2,540.1 | 2,655.3 | 2,810.7 | 2,911.5 | 3,006.4 |
| Other long-term assets | 1,684.3 | 1,616.7 | 1,616.7 | 1,616.7 | 1,616.7 |
| Total non-current assets | 4,224.4 | 4,272.1 | 4,427.4 | 4,528.3 | 4,623.1 |
| Cash & equivalent | 140.7 | 336.8 | 166.5 | 265.8 | 368.3 |
| Stock | 29.9 | 39.6 | 29.9 | 30.8 | 30.9 |
| Debtors | 56.2 | 65.1 | 72.7 | 74.7 | 75.0 |
| Other current assets | 131.2 | 245.9 | 245.9 | 245.9 | 245.9 |
| Total current assets | 358.0 | 687.4 | 515.1 | 617.2 | 720.0 |
| Creditors | 135.7 | 180.0 | 149.9 | 154.3 | 154.5 |
| Short-term borrowings | 213.5 | 56.2 | 57.3 | 58.5 | 59.7 |
| Other current liabilities | 4.3 | 16.3 | 12.7 | 12.7 | 12.7 |
| Total current liabilities | 353.4 | 252.6 | 219.9 | 225.4 | 226.9 |
| Long-term borrowings | 1,413.7 | 1,332.0 | 1,198.8 | 1,258.7 | 1,321.6 |
| Other long-term liabilities | 571.5 | 548.9 | 548.9 | 548.9 | 548.9 |
| Total long-term liabilities | 1,985.2 | 1,880.9 | 1,747.7 | 1,807.6 | 1,870.5 |
| Shareholders’ funds | 2,243.7 | 2,817.6 | 2,965.1 | 3,102.4 | 3,235.5 |
| BV/share (RM) | 0.90 | 1.13 | 1.19 | 1.24 | 1.29 |
Cash Flow (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Pretax profit | 186.9 | 346.2 | 379.8 | 382.7 | 385.5 |
| Adjustments for non cash items | 196.7 | 195.3 | 141.5 | 148.6 | 154.6 |
| Working capital | 1.7 | (47.1) | (123.0) | (94.1) | (96.5) |
| Cash flow from operations | 385.3 | 494.4 | 398.3 | 437.2 | 443.7 |
| Capital expenditure | (167.9) | (145.2) | (250.0) | (200.0) | (200.0) |
| Net investments & sale of fixed assets | 0.1 | 0.5 | 5.0 | 5.0 | 5.0 |
| Cash flow from investing | (168.4) | (283.3) | (245.0) | (195.0) | (195.0) |
| Debt raised/(repaid) | (155.0) | (267.6) | (132.1) | 61.1 | 64.1 |
| Dividends paid | 0.0 | (62.5) | (137.5) | (150.0) | (156.3) |
| Cash flow from financing | (104.3) | (15.0) | (323.6) | (142.9) | (146.2) |
| Net cash flow | 112.6 | 196.1 | (170.3) | 99.2 | 102.5 |
| Net cash/(debt) c/f | 138.1 | 336.8 | 166.5 | 265.8 | 368.3 |
Key Ratios (YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Revenue growth (%) | -28.4 | 21.7 | 2.4 | 2.8 | 0.3 |
| EBITDA growth (%) | -49.8 | 37.7 | 3.7 | 2.7 | 1.7 |
| Pretax margins (%) | 14.9 | 22.7 | 24.3 | 23.8 | 23.9 |
| Net profit margins (%) | 13.3 | 16.9 | 18.3 | 17.9 | 18.0 |
| Interest cover (x) | 4.2 | 7.6 | 12.2 | 10.9 | 11.0 |
| Effective tax rate (%) | 11.3 | 26.0 | 25.0 | 25.0 | 25.0 |
| Net dividend payout (%) | 41.7 | 51.0 | 48.2 | 52.2 | 54.0 |
| Trade debtors turnover (days) | 16 | 16 | 17 | 17 | 17 |
| Stock turnover (days) | 7 | 7 | 7 | 7 | 7 |
| Trade creditors turnover (days) | 56 | 68 | 55 | 55 | 55 |
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