TA Securities values Main Market-bound Johor Plantations Group at RM1.06

Monday 16 Dec 2024

KUALA LUMPUR (June 24): TA Securities has derived a fair value of RM1.06 for Main Market-bound Johor Plantations Group Bhd (JPG), based on calendar year 2025 price-earnings ratio (PER) of 14 times, which is a 20% discount to TA Securities' sector target PER of 18 times.

In a note on Monday, the research house, which does not have a rating on the stock, said the discount is justifiable due to JPG's considerable debt obligations and the substantial capex needed for its replanting programme.

On the outlook for the group, TA Securities said it expects crude palm oil (CPO) prices to average at RM4,000/tonne in 2024 and RM3,800/tonne in 2025.

“With soybean supply expected to rise in 2024, we believe it would be tough to paint a bullish price outlook for CPO due to the substitution effect.

“The growth in 2024/25 is primarily driven by soybean and palm oil production, with increases also anticipated in olive oil and peanut production,” it said.

TA Securities said the premium of soy oil futures over palm oil futures had reduced from its peak of US$803 (RM3,785)/tonne to less than US$150/tonne recently, which falls within the typical range of US$100 to US$200/tonne.

“Therefore, palm oil remains relatively appealing as an alternative, to some degree.

“This perspective could help mitigate potential declines in CPO prices, in our view.

“We anticipate the spread to remain stable at the current level in the second half of the year,” it said.

TA Securities said it expects JPG to register a net profit growth of 24.6% to RM204.6 million for the financial year ending Dec 31, 2024 (FY2024).

“The higher earnings would be driven by higher palm oil prices, fresh fruit bunch production, and lower production costs.

“However, we expect earnings to decrease in FY2025 due to lower palm oil prices and lower production volume growth due to a more aggressive replanting programme,” it said.

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