Johor Plantations' palm oil complex opens new growth avenue

KUALA LUMPUR: The Johor Plantations Group's development of an Integrated Sustainable Palm Oil Complex (iSPOC) could serve as a new source of earnings growth beginning in fiscal year 2027. The complex, located in Sedali, Johor, will shift the company away from producing bulk crude palm oil and palm kernel, and into higher-value, downstream palm-based products.

Successful commissioning and ramp-up could lead to a significant boost in earnings from fiscal year 2027, potentially supporting a higher valuation multiple due to the shift in earnings mix towards value-added products.

Apex Securities Bhd, which has begun covering the company, noted that the upstream and midstream operations of Johor Plantations remain its core businesses, accounting for 99% of its revenue in fiscal year 2025. Nevertheless, the El Nino weather phenomenon developing could support crude palm oil prices by reducing production during the coming years, extending the current high-CPO-price environment into fiscal year 2027.

The US National Oceanic and Atmospheric Administration predicts a greater than 90% probability of a very strong El Nino during the autumn and winter of 2026 and 2027.

Apex Securities sees a tighter supply outlook as the key catalyst, which would benefit Johor Plantations due to its strong exposure to upstream earnings. Higher realized CPO prices could translate into stronger margins, as a large portion of plantation costs would not rise proportionately with selling prices. The firm has given Johor Plantations a Buy rating with a target price of RM2.23.