KUALA LUMPUR (Feb 18): Analysts remained upbeat on Johor Plantations Group Bhd (KL:JPG), with at least one raising its earnings forecast for the group, after its fourth-quarter financial results came in better than expected.

RHB Research in a note on Tuesday said it raised its earnings forecast for Johor Plantations by 5% and 7% for FY2025-FY2026 after adjusting for fresh fruit bunch (FFB) growth assumptions and imputing lower unit costs.

"We introduce FY27F earnings with MPOB CPO price of MYR4,100/tonne," it said. RHB's target price on the counter was raised to RM1.65, implying a 14 times 2025 price multiple.

RHB highlighted that Johor Plantations’ fresh fruit bunch (FFB) output for FY2024 grew 9.3% year-on-year (y-o-y), slightly below the group’s initial 11-12% target due to reduced sunlight, affecting yields in the final quarter.

Therefore, Johor Plantations expects a more modest FFB growth of 5-6% for FY2025, citing weather uncertainties.

On pricing, the group secured an average crude palm oil selling price of RM4,331 per tonne for FY2024, a 3.6% premium over the Malaysian Palm Oil Board’s (MPOB) reference price. Johor Plantations has also locked in a similar 3% premium for 60-70% of its 2025 output.

Meanwhile Hong Leong Investment Bank (HLIB) said Johor Plantations’ earnings had exceeded projections, coming in 111-136% above expectations.

The research house added that Johor Plantations’ 4Q2024 net profit rose 68.8% y-o-y to RM92.7 million, buoyed by higher realised palm product prices and lower financing costs.  The group declared a total dividend per share (DPS) of 5.25 sen, translating to a 4.4% yield.

Cost efficiencies played a pivotal role in boosting margins. Production costs stood at RM2,085 per tonne in FY2024 (-11% y-o-y), aided by lower fertiliser costs, said the research house.

However, a minimum wage hike and additional Employees Provident Fund contributions for foreign workers are expected to push labour costs slightly higher in FY2025, said HLIB.

 “Capex is guided at RM350 million and RM300 million for FY25-26, which will be mainly utilised for the construction of an integrated sustainable palm oil complex,” the research house said, adding that land clearing began in December 2024, with infrastructure work set to commence in February 2025. 

Both research houses maintained a “buy” call on Johor Plantations, citing attractive valuations. RHB raised its target price (TP) to RM1.65, while HLIB retained its TP at RM1.35.

Key risks to watch include CPO price volatility and adverse weather conditions, analysts said.

At the time of writing, shares of Johor Plantations Group traded two sen or 1.7% lower to RM1.18, giving the group a market capitalisation of RM2.95 billion.