• Maintain BUY, with new MYR1.55 TP, from MYR1.50, 24% upside and c.4% FY25F yield. Johor Plantations Group’s 9M24 earnings were in line with our expectations. Moving forward, we expect earnings to remain robust, driven by higher-than-average FFB output growth and higher ASPs. JPG’s valuation remains attractive, trading at 11.7x FY25F P/E, which is at the mid-point of its peer’s 8-16x.

• 3Q24 core earnings jumped 51% QoQ (+11% YoY), bringing 9M24 core net profit to MYR172.6m (+69% YoY). This is in line with our and consensus forecasts, coming in 74-75% of FY24F. JPG declared a DPS of 1.25 sen, bringing 9M24 DPS to 2.5 sen.

• 3Q24 FFB output rose 20% QoQ (+5% YoY), bringing 9M24 FFB output growth to +19.7% YoY. In YTD-Oct 2024, this has moderated to 15.2% YoY. JPG’s peak output was in August and it expects a MoM moderation from here on. Despite this, management guided to end the year with FFB growth of 11- 12% YoY (up from previous guidance of +10% YoY) for FY24, and continuing in FY25 at 10-12% YoY. As our previous forecasts were a tad optimistic, we trim our FFB output growth forecast to 11% YoY for FY24 from +16%, but raise our FY25F-26F to 6-8% (from 4-5%).

• JPG’s CPO ASP was MYR4,157/tonne in 3Q24 (4.2% premium over the Malaysian Palm Oil Board (MPOB) average), while 9M24 CPO ASP of MYR4,149/tonne was at a +3.5% premium over MPOB. Going forward, JPG has locked in the ASP premium over MPOB for c.70% of its output in 2025 at similar premiums to that of 2024. Management expects the current CPO price rise to benefit it, as it estimates every MYR100/tonne rise in CPO price to impact net profit by MYR22m (or c.10%).

• JPG recorded a lower QoQ unit cost by 12% at MYR1,900/tonne in 3Q24, bringing 9M24 to -13% YoY, thanks to the solid output growth. Going forward it expects unit costs to remain at around MYR2,000/tonne (-13% YoY), on lower fertiliser prices (FY24 requirements bought at 10-15% lower YoY). Moving forward in FY25, management noted that it is in the midst of securing full year fertiliser requirements at prices which are 10% lower YoY. As such, we bring down our unit cost slightly by 5-10% for FY24F-26F.

• Overall, we increase our FY24F-26F earnings by 6%, 4% and 5% after adjusting for FFB growth assumptions and imputing lower unit costs.

• Keep BUY, with new MYR1.55 TP based on an unchanged 14x 2025F P/E, with a 4% ESG premium built in to account for its ESG score of 3.2 out of 4. It is trading at 11.7x FY25F P/E, which is at the mid-point of its peer’s 8-16x. We continue to like JPG for its attractive valuation and we expect it to benefit from the rising CPO price environment given its upstream earnings profile.

Source: RHB Securities Research - 14 Nov 2024