Johor Plantations Group Berhad - Transforming into an integrated player
Thu, 20-Jun-2024 08:37 am
by Steven Chong • Apex Research

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JPG (5323)

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0.95

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  • RSPO certified planter. JPG benefits from a pricing advantage due to its RSPO-certified plantation operations, allowing the Group to charge premium against the standard MPOB CPO prices. Furthermore, JPG is well-positioned to meet the European Union Deforestation Regulation (EUDR) requirements, thanks to its comprehensive traceability system that extends to its oil palm fields. This capability is expected to help JPG gain access to international markets more effectively and maintain strong pricing power.

  • Diversifying towards downstream. JPG sells CPO and PK to third-party downstream refineries in Malaysia, where these products are further processed into edible oils or specialty oil products. Looking ahead, the Group intends to expand vertically downstream by constructing an integrated sustainable palm oil complex. This strategic move is expected to not only generate an additional revenue stream but also allows the Group to stabilise bottom line from the flexibility to divert CPO and PK to own refinery when market prices are low. That said, earnings from this complex will only start contributing in 3Q26.

  • Good mix of tree age profile. As at FY23, 69.8% of JPG oil palms are in their peak production age, with an average oil page tree age of 12.9 years. We opined JPG has excellent age profile which would lead to an increase in CPO and PK production with minimal increase in costs. Given the young age profile, JPG maintain a relatively low annual replanting target of 4% of total planted area.
  • FFB yield set to recover soon. FFB yield and OER are set to improve in FY24 onwards after the severe labour shortages encountered last year was resolved. We estimate CPO production may surged to 318k mt (+17.3% yoy) for FY24, based on FFB yield at 23 mt/ha (vs 20.3mt/ha in FY23) and OER at 20%. While we anticipate a slight reduction in the mature planted area due to JPG returning some of its rented land to Kulim, we do not expect this to have a significant impact on FFB production.
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