Hap Seng Plantations Holdings Berhad
Thu, 21-Nov-2024 08:20 am
by Steven Chong • Apex Research

Counter

HSPLANT (5138)

Target Price (RM)

2.20

Recommendation

Hold

Summary

  • Hap Seng Plantations recorded CNP of RM43.4m (+35.2% qoq, +86.7% yoy) in 3QFY24, bringing 9MF24 CNP to RM99.8m (+72.5% yoy), which was within our expectations at 73% but exceeded consensus forecast at 89%.

  • Given that reported CNP came in-line with expectations, we kept our earnings forecast unchanged.

  • Maintained our HOLD recommendation with a TP of RM2.20 based on forward PE multiple of 12.9x and FY25F EPS of 17.0 sen.

 

Results Review

  • Results review. 3QFY24 CNP (excluding FV loss on biological assets: RM12.0m) stood at RM43.4m (+35.2% qoq and +86.7% yoy) thanks to lower production costs in tandem with reduced fertiliser costs. Meanwhile, 3QFY24 revenue registered at RM177.3m (-3.0% qoq, +7.7% yoy). The robust topline performance was primarily driven by higher CPO and PK prices as well as better sales output.

 

  • Results within expectation. 9MFY24 CNP of RM99.8m came within our expectation at 73% but far exceeded consensus forecast at 89%. We foresee earnings to accelerate in 4QFY24, anchored bythe strong upswing in CPO prices.

 

  • Operations Highlights. 33QFY24 CPO and PK output rose by +9.2% yoy and +5.1% yoy in tandem with peak seasonal production cycle. Meanwhile, average selling price of CPO and PK for 3QFY24 were at RM4,098/tonne (+4.4% yoy) and RM2,731/tonne (+27.4% yoy) respectively which is both higher as compared to 3QFY23. 

 

  • Industry Highlights. Malaysia palm oil inventory registered at 1.88m tonnes, dropping -6.4% mom from 2.01m tonnes in Sep 24. The decline in stock was led by increased export demand from China, India, and the EU. We opined that the steep fall of palm oil inventory in Oct 24 is a positive surprise to the sector and would support CPO prices in the near-term.

 

  • Outlook. YTD (Oct 24) FFB production of 532k is on track with our estimation at 82%, but slightly shy of the Group’s guidance at 76%. Moving forward, we foresee HAPL to record stellar earnings in 4QFY24 as CPO prices are expected to remain elevated until 1QFY25.

 

  • Valuation. No changes to our earnings forecast. Re-iterate our HOLD recommendation at FV: RM2.20 based on 12.9x PE pegged to FY25 EPS of 17.0 sen.

 

  • Risk. EU export ban and regulations, changing weather patterns affect FFB production, taxation and export ban in Indonesia threatens local CPO demand, shortage of labours and rising operational cost. 

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The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

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