Hap Seng Plantations Holdings Bhd - 1QFY25 Lifted by Higher Prices
Wed, 28-May-2025 07:21 am
by Steven Chong • Apex Research

Counter

HSPLANT (5138)

Target Price (RM)

2.00

Recommendation

Hold

  • HAPL’s 1QFY25 CNP surged +61.6% yoy, but fell -35.4% qoq to RM39.2m, came broadly in line with our expectations, representing 24.6% and 24.8% of our and consensus forecasts, respectively.

  • FFB production hit 132k tonnes, meeting our forecast at 19.6%. We expect output to improve in the coming quarters on recovery from adverse weather conditions.

  • Re-iterate our BUY recommendation with unchanged target price of RM2.00, based on 10.2x P/E multiple pegged to FY25F EPS.

 

Results within expectations. 1QFY25 CNP at RM39.2m (excluding FV loss on biological assets of RM16.7m) came within expectations, accounting for 24.6%/24.8% of both ours and consensus CNP forecast. 

 

YoY. CNP rose 61.6% yoy, driven by higher CPO and PK ASPs (RM4,866 and RM3,741 vs. RM4,023 and RM2,329 in 1QFY24). Similarly, revenue also climbed by +12.8% to RM179.4m despite an -11.3% yoy decline in FFB production.

 

QoQ. CNP shed -35.4% qoq as wet weather in Sabah impacting FFB output. Revenue for the quarter fell -23.1% qoq on lower CPO and PK sales volume.

 

Dividend. No dividend was declared during the quarter, as expected. However, we anticipate a DPS of 12 sen for FY25, based on a 60% payout ratio. This translates into a respectable dividend yield of 6.5% in FY25 at current share price of RM1.83.

 

Outlook. FFB output stood at 132k tonnes, accounting for only 19.6% of our full-year forecast. Nonetheless, we anticipate FFB production to gain momentum in the coming quarters as it gradually recovers from the impact of adverse weather conditions. On the other hand, we expect CPO prices to come under pressure, likely ranging between RM3,800 and RM4,000, as stockpiles are projected to build up in 2Q25 amid a recovery in palm oil production. As such, we expect the Group’s 2QFY25 earnings to be lacklustre on a sequential basis due to the softer CPO price outlook.

 

Earnings Revision. Given that the reported earnings are deemed within expectations, we kept our forecast unchanged.

 

Valuation. Re-iterate our HOLD recommendation with unchanged target price of RM2.00, by pegging 10.0x P/E multiple to FY25F EPS and 0% ESG factored premium/discount based on three-star ESG rating.

 

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, increased competition from alternative vegetable oils

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