PETALING JAYA: Johor Plantations Group Bhd
’s fresh fruit bunch (FFB) production is expected to remain broadly stable next year as improving yields from maturing estates help offset the impact of its accelerated replanting programme and adverse weather conditions.
However, higher production costs, particularly for fertilisers, transportation and labour, could continue to weigh on the plantation group’s earnings, even as it looks towards contributions from its integrated sustainable palm oil complex (iSPOC) in 2027.
In a report, Hong Leong Investment Bank (HLIB) Research said reduced harvesting areas following the accelerated replanting programme, coupled with lower yields due to dry weather conditions, resulted in FFB production declining 11.8% year-on-year to 712,800 tonnes in the first nine months of 2026 (9M26).
“Management expects FFB production in the fourth quarter of financial year 2026 (4Q26) to remain broadly in line with the preceding quarter, bringing full-year output to about one million tonnes.
“For 2027, management expects production to remain at a similar level, with the impact of El Nino and further reductions in harvesting areas due to the ongoing replanting programme offset by more estates entering higher-yielding age profiles,” HLIB Research said.
In 3Q26, Johor Plantations posted core earnings of RM87.6mil, bringing 9M26 core earnings to RM176.9mil, which accounted for 70.2% of HLIB Research’s full-year estimate.
It deemed the results to be within expectation and anticipates 4Q26 performance to remain stable, supported by steady FFB production.
However, the results were below analysts’ consensus, accounting for only 62.7% of full-year estimate.
HLIB Research said its calculation of core earnings excluded a RM18.1mil fair value gain on biological assets and a RM6.8mil fair value gain on financial assets.
It said financial year 2026 (FY26) crude palm oil (CPO) production cost guidance is maintained at around RM2,500 per tonne, reflecting higher harvesting, transportation, as well as upkeep and maintenance costs.
For FY27, CPO production costs are expected to increase by a further 5%, driven by higher fertiliser costs and minimum wage hike effective June next year.
The research firm maintained its “hold” call on the stock, with an unchanged target price of RM1.84, based on 15 times its FY27 core earnings per share of 12.3 sen.
Similarly, CIMB Research kept its “hold” rating, saying flattish internal FFB production and rising input costs could constrain FY27 upstream earnings growth, partly offset by potential CPO price upside and maiden earnings contributions from iSPOC.
However, RHB Research has a “buy” call with a new RM2 target price, which it said was justified by the group’s environmental, social and governance credentials, which enable it to command premium selling prices.
The expected commencement of commercial operations at its integrated sustainable palm oil complex iSPOC in the first half of FY27 is expected to make the group a fully integrated player.
An analyst told StarBiz that a key challenge will be managing higher input costs, particularly fertiliser and labour expenses.
“The extent to which these costs can be offset by better crop yields and stronger palm oil prices will determine its earnings recovery going forward,” he added.
