Lang
Johor Plantations Group Bhd's (JPG) financial performance for the coming periods is largely anticipated to depend on a significant recovery in fresh fruit bunches (FFB) production during the second half (2H) of 2026, alongside stable crude palm oil (CPO) prices. This outlook follows a weaker-than-expected first-half showing.
RHB Research analyst Hoe Lee Leng highlighted that JPG's FFB output is projected to rebound in 2H, aligning with seasonal production peaks. She added that elevated CPO prices would be particularly beneficial for the group, given its high sensitivity to CPO price fluctuations. JPG has adjusted its FFB production target to approximately one million tonnes for the financial years 2026 and 2027 (FY26-27), with a 40:60 split between the first and second halves of production.
Reflecting these dynamics and other factors, RHB Research has revised its earnings forecasts for FY26-28. The firm lowered its FY26 forecast by 14.5 per cent but increased FY27 and FY28 forecasts by five per cent and 2.8 per cent, respectively. These adjustments consider lower FFB growth, a reduced average selling price (ASP) premium over the Malaysian Palm Oil Board's (MPOB) reference price, anticipated downstream losses, higher interest income and costs, and lower administrative expenses. Hoe also noted an update to their FY27-28 CPO price assumptions, raising them to RM4,500-4,400 a tonne from the previous RM4,300, incorporating their latest in-house foreign exchange projections. Consequently, RHB Research maintained its 'Buy' recommendation for JPG and elevated its target price from RM1.90 to RM2.20, citing expectations of a seasonal FFB output recovery and stronger CPO prices.
Conversely, Hong Leong Investment Bank Bhd (HLIB) analyst Chye Wen Fei downgraded JPG's stock from 'Buy' to 'Hold', while keeping its target price steady at RM1.78. Chye explained that the company's recent share price appreciation had outpaced its underlying fundamentals. She elaborated that JPG's softer-than-expected earnings led HLIB to cut its FY26 and FY27 core earnings forecasts by 15 per cent and 7.7 per cent, respectively. These reductions primarily stem from lower FFB yield assumptions, though partially mitigated by higher average CPO price assumptions following broader sector-wide upward revisions.
Chye pointed out that JPG's core earnings for 1H FY26 stood at RM91.4 million, marking a 36.1 per cent year-on-year decline. This figure represented only 27.2 per cent to 30.8 per cent of both consensus and HLIB Research's full-year estimates, largely due to lower-than-expected FFB production. JPG's FFB output in the first half dropped by 11.3 per cent to 420,478 tonnes. This decline was mainly attributed to reduced harvesting areas resulting from an accelerated replanting program and weakened yields exacerbated by prolonged moisture stress. While management anticipates an FFB production recovery in 2H, Chye's estimates suggest that FY26 output could still decrease by approximately 9.0 per cent compared to FY25, owing to reduced mature areas and persistent weaker yields.
Regarding JPG's downstream expansion, HLIB reported that construction of the Ispoc complex was 84 per cent complete as of June 2026. The renewable energy plant is slated for commissioning in Q3 2026, with the refinery and palm oil mill following in Q4 2026. The kernel crushing plant and animal feed mill are targeted for commissioning in FY27. Management expects Ispoc to incur a small loss in FY26 but projects it to begin contributing positively to JPG from FY27, aiming for a profit after tax margin of eight per cent to 10 per cent on an estimated annual revenue of about RM750 million once fully operational.
Source: KLSE Screener