Johor Plantations full-year earnings likely to rise on good 1H showing
The research firm said JPG's 1H25 net profit of RM151.1mil was 6% above its forecast and 5% above consensus due to a higher-than-expected gross profit margin and lower-than-estimated interest expense.
'We maintain 'buy' with a target price (TP) of RM1.72 per share as we like JPG for its pure exposure to crude palm oil (CPO) prices and premium selling prices,' the research firm said in a report.
The TP was derived by applying a price-earnings (PE) multiple of 15 times on the financial year 2026 earnings per share of 11.5 sen. 'The PE of 15 times is the multiple that we used to value Genting Plantations Bhd (GenP).
'We believe JPG should trade at the same PE as GenP due to its high leverage to CPO prices, and strategic location of its oil palm estates in Johor.'
AmResearch noted JPG's selling price of RM4,605 per tonne in 1H25 was RM215 higher than Malaysian Palm Oil Board's average spot price of RM4,390.
This is due to strong demand for Roundtable on Sustainable Palm Oil (RSPO)-certified palm products.
It expects demand for identity preserved RSPO-certified palm products to remain healthy as the European Union Deforestation Regulation will be implemented on Dec 30, 2025.
For the second quarter of financial year 2025 (2Q25), it said a rise in CPO sales volume helped offset lower CPO prices, resulting in a steady net profit of RM75.2mil.
Average CPO price slid to RM4,331 in 2Q25 from RM4,969 in 1Q25.
According to AmResearch, JPG's fresh fruit bunch production is also showing signs of recovery after being hit by floods in 1Q25.
Output fell 7.8% year-on-year in the first half, but rebounded strongly with a 25% quarter-on-quarter increase in 2Q25.
Production is expected to peak in August or September.'
At the time of writing, JPG shares traded at RM4.98, down 15% year-to-date.
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