Johor Plantations’ Strategic Advantage
MIDF Amanah Investment Bank Bhd (MIDF Research) has maintained a positive outlook on Johor Plantations Group Bhd following a recent visit to its Kluang operations, assigning a non-rated stance with a fair value estimate between RM1.16 and RM1.51 per share. T
The research house noted that Johor Plantations’ strong fundamentals, favourable industry dynamics and solid expansion plans underpin its positive view, while cautioning that earnings growth could moderate in the coming years.
MIDF Research highlighted that Johor Plantations is well-positioned to benefit from sustained elevated crude palm oil (CPO) prices, currently hovering between RM4,000 and RM5,000 per metric tonne. Supply constraints in Malaysia and Indonesia, combined with robust global demand, are expected to keep palm oil prices firm.
Reflecting these dynamics, Malaysia’s local CPO price ended October at RM4,735 per metric tonne, a 12.7% month-on-month increase, and Johor Plantations’ strong fourth-quarter FY24 results, with a core net profit of RM92.1 million, lifted its full-year net profit to RM254.8 million, exceeding consensus forecasts.
The research firm also pointed to Johor Plantations’ competitive advantages, including its RSPO-certified operations, a favourable palm age profile, and economies of scale across its nearly 60,000 hectares of plantations in Johor. Management’s focus on sustainability, with all mills and estates certified under RSPO, MSPO and ISCC standards, was also highlighted as a strength, especially as ESG considerations become increasingly crucial for the industry.
Looking ahead, MIDF Research expects Johor Plantations’ earnings to experience slower growth between FY24 and FY27F, projecting a compound annual growth rate of -2.8%. The moderation is attributed to an anticipated decline in average CPO selling prices and an improved fresh fruit bunch (FFB) yield due to a favourable palm age profile.
Nonetheless, Johor Plantations’ cost structure remains supportive, with management expecting ex-mill CPO production costs to stabilise between RM2,100 and RM2,000 per metric tonne for FY25–FY26, helped by softer fertiliser prices.
MIDF Research also noted that Johor Plantations’ management anticipates FFB output growth to sustain at a mid-single-digit rate in 2025 after achieving a 9% increase in 2024.
With operating profit margins projected to stay above 30% and PAT margins ranging between 24% and 27% through FY25–FY27F, Johor Plantations is expected to maintain robust profitability despite a softer pricing environment.
