PETALING JAYA: Analysts are mostly optimistic about Johor Plantations Group Bhd
’s earnings prospects following the group’s stellar results for last year.
RHB Research said it expects the planter’s earnings to remain robust moving forward, thanks to higher average selling prices for palm oil and manageable unit costs.
Johor Plantations’ core earnings jumped 22% quarter-on-quarter (q-o-q) and rose 31% year-on-year (y-o-y) for the fourth quarter of last year (4Q24) , bringing core profit to RM265.4mil for the full year.
“This was above our projections, accounting for 109% of our forecast and 107% of consensus estimates for last year,” said RHB Research in a report yesterday.
The positive deviation mainly came from lower-than-expected costs, down 11% y-o-y versus the research house’s expectations of 8%.
For 4Q24, Johor Plantations also saw crude palm oil (CPO) prices of RM4,826 per tonne, up 16% q-o-q and 26% y-o-y, bringing average prices to RM4,331 per tonne for last year.
“As usual, the group has not sold forward its output, but locked in a premium ranging between RM130 and RM200 per tonne over the Malaysian Palm Oil Board (MPOB) price for 60% to 70% of its output for this year,” said RHB Research.
Based on this, the research house has kept its CPO-premium forecast of 3% for Johor Plantations from this year to 2027.
“Overall, we revise our earnings forecasts upwards by 5% and 7% for 2025 and 2026 after adjusting for fresh fruit bunch (FFB) growth assumptions and imputing lower unit costs,” the research house said.
It also introduced its earnings forecast for 2027 with MPOB’s CPO price of RM4,100 per tonne.
RHB Research has kept a “buy” call on the stock with a higher target price of RM1.65.
Meanwhile, Hong Leong Investment Bank Research (HLIB Research) retained its profit forecasts on the planter with a “buy” call at an unchanged target price of RM1.35.
For this year, the cost of CPO production would likely stay flat versus last year, the research house said.
“Higher labour costs arising from the minimum-wage hike will be offset by lower fertiliser prices and mid-single-digit FFB output growth,” it said.
In addition, the potential impact from contributions to the Employees Provident Fund for foreign workers, which has yet to be taken into account for this year’s CPO production cost guidance, on the other hand, is insignificant at RM1.5mil a year.
The group’s capital expenditure is expected to be at RM350mil and RM300mil for 2025 and 2026, respectively, which will be mainly utilised for the construction of an integrated sustainable palm oil complex.
“We understand that land clearing for the project commenced last December, while infrastructure work is scheduled to start this February,” said HLIB Research.
