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| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 |
| Last Traded | RM0.20 |
| Recommendation |
AmInvestment Bank has maintained its “BUY” recommendation for Johor Plantations Group, setting a target price of RM1.72 per share, reflecting a positive outlook driven by expectations of improved financial performance and strategic operational enhancements. The last traded price for the company was RM1.60.
Performance Review
The investment bank anticipates Johor Plantations Group’s net profit to rise by 5% to 10% quarter-on-quarter in 3QFY25. This expected growth is attributed to higher palm product prices and increased fresh fruit bunch (FFB) production, with internal FFB output surging by over 10% QoQ. According to MPOB data, the average crude palm oil (CPO) price climbed 5.3% to RM4,271/tonne in 3Q2025 from RM4,056/tonne in 2Q2025.
Furthermore, AmInvestment Bank has upgraded its FY25F net profit forecast by 2.9%, reflecting a stronger gross profit margin of 37%, an increase from the previously estimated 36.5%. This enhancement is supported by higher palm kernel credits and a notable RSPO premium, which stood at RM275/tonne in 2QFY25. The average palm kernel price also saw a significant year-on-year increase of 42.7% in 9MFY25.
Operational Dynamics and Margins
While the group’s gross profit margins have improved, the internal cost of CPO production per tonne is projected to be marginally higher in 3QFY25, estimated between RM2,150 and RM2,160 per tonne, compared to RM2,147 per tonne in 2QFY25. This modest increase is largely due to higher fertilizer costs, though partly mitigated by greater CPO output and palm kernel credits. Looking ahead, 4QFY25 may see further cost increments due to EPF contributions for foreign workers and the seasonal decline in FFB production. The company currently employs 4,000 estate workers.
Future Outlook and Strategic Growth
A key future growth driver for Johor Plantations Group is the commissioning of its 51%-owned palm refinery, scheduled for the second half of FY26. This refinery, with a production capacity of 150,000 tonnes per year, is estimated to contribute RM7.5 million annually to net earnings, with JPG’s share amounting to RM3.8 million. This contribution has not yet been factored into FY27F net profit projections. The group’s competitive advantages include the strategic location of its Johor estates and its Identity Preserved (IP) RSPO certification, allowing it to sell CPO at a premium of RM100-RM250 per tonne above MPOB prices.
Valuation and Recommendation
AmInvestment Bank maintains its “BUY” call on Johor Plantations Group, citing its potential to benefit from resilient CPO prices and strategic expansions. The target price of RM1.72 per share is derived using a 15x FY26F price-to-earnings (PE) multiple, consistent with the valuation applied to Genting Plantations. This comparative valuation is justified by JPG’s premium selling prices and high leverage to CPO prices. Key risks include a significant fall in CPO prices and an increase in the costs of fertilizer and wages.
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