PETALING JAYA: Johor Plantations Group Bhd is well-positioned to capitalise on the current elevated crude palm oil (CPO) prices at RM4,000 to RM5,000 per tonne, supported by limited supply growth and solid export demand.
Following a recent visit to the group’s plantation in Kluang, Johor, MIDF Research said it came away feeling positive about Johor Plantations’ business outlook and its expansion plan.
From a valuation standpoint, the research house believes that United Plantations Bhd
, Hap Seng Plantations Holdings Bhd, Kim Loong Resources Bhd, TSH Resources Bhd and United Malacca Bhd are the closest peers to Johor Plantations due to similarities in their business models as well as the total planted area.
“These peers and Johor Plantations’ planted area are relatively the same circa 40,000 ha to 50,000 ha,” it added.
According to MIDF Research, Johor Plantations has the second-highest CPO yield after United Plantations, which is the most important single indicator of performance for a plantation company.
The sector five-year historical mean price-to-earnings ratio is about 15 times, and it is currently trading at 10.5 times.
“Considering all these factors, we believe a reasonable price-to-earnings ratio for Johor Plantations would fall between 10 times to 13 times,” it noted.
Based on the financial year 2025 (FY25) profit forecast of RM290.1mil or earnings per share of 11.6 sen, MIDF Research estimated that the stock’s fair value to range between RM1.16 and RM1.51 per share.
Johor Plantations’ strong financial performance in the fourth quarter (4Q24) of financial year 2024 (FY24), with a core net profit of RM92.1mil, has lifted its FY24 net profit to RM254.8mil.
“These results surpassed expectations, representing over 100% of consensus full-year forecasts, and we expect the positive momentum to continue into 1Q25 and FY25, driven by sustained high average CPO prices realised and CPO delivery,” MIDF Research noted.
The group’s management also expects CPO production cost to stabilise at RM2,100 to RM2,000 per tonne for FY25 to FY26.
“This is in line with our estimates, following a reduction of fertiliser costs that will be imputed (generally accounts 15% to 20% of cost of production), due to softened components fertiliser prices that have been seen in the past months.
“As a result, operating profit margins should be stabilised above 30%, over FY25 to FY27 forecasts, with the profit after tax margin ranging 24% to 27% in the same period,” noted the research house.
On the group’s competitive strengths, MIDF Research said Johor Plantations is a long-established Roundtable on Sustainable Palm Oil (RSPO)-certified palm oil producer committed to sustainability, with all its mills and plantations meeting RSPO standards.
Operating across nearly 60,000ha in Johor, the company benefits from economies of scale, reducing costs in areas like fertilisers and machinery.
