Johor Plantations' palm oil complex opens new growth avenue

KUALA LUMPUR: Johor Plantations Group Bhd's move into higher-value downstream palm oil products through its Integrated Sustainable Palm Oil Complex (iSPOC) could open a new earnings growth avenue from financial year 2027 (FY27).

Apex Securities Bhd, which has initiated coverage on the company, said the complex would mark Johor Plantations' transition beyond bulk crude palm oil (CPO) and palm kernel production into value-added palm-based products.

"Successful commissioning and utilisation ramp-up could meaningfully lift earnings from FY27 and potentially support a higher valuation multiple as the earnings mix shifts towards value-added downstream products," it said in a note.

Located in Sedali, Johor, iSPOC is scheduled to be commissioned in the second half of FY26.

A key component of the complex is a specialty fats and oils refinery, which will mark Johor Plantations' entry into the downstream segment and enable the group to produce premium palm-based products.

Apex Securities said upstream and midstream operations remained the group's core businesses, contributing RM1.3 billion and RM457 million respectively, or about 99 per cent of its FY25 revenue.

Meanwhile, the developing El Nino weather phenomenon could support CPO prices as prolonged hot and dry conditions risk reducing palm oil production with a lag.

Apex Securities said the US National Oceanic and Atmospheric Administration sees a greater than 90 per cent probability of a very strong El Nino during the Northern Hemisphere autumn and winter of 2026 and 2027.

"The key catalyst would be downward revisions to Malaysian and Indonesian production expectations as El Nino develops, potentially extending the current high-CPO-price environment into FY27," it said.

Apex Securities said a tighter supply outlook would benefit Johor Plantations given its predominantly upstream earnings exposure.

Higher realised CPO prices could translate into stronger margins as a significant portion of plantation costs would not rise proportionately with selling prices, it added.

Apex Securities has a "Buy" call on Johor Plantations with a target price of RM2.23.