Hibiscus Petroleum (Hibiscus) reported a mixed 4QFY23 result, with a core net profit of RM113.5m (-47.6% YoY, +28.2% QoQ). This is on the back of lower offtake volume and average realised price, though mitigated by lower effective tax rate. Nevertheless, Hibiscus recorded a strong full year FY23 core net profit of RM423.1m, higher by 24.9% YoY due to full-year consolidation from Repsol’s assets. The result exceeds our estimates at 109% of full-year numbers, though in-line with consensus at 99%. The discrepancy from our estimate is due to better unit production costs recorded. On FY24F outlook, Hibiscus guided that it estimates to increase sales volume by 6%-10% from current offtake volume of 7.1MMboe. We also expect Brent Crude price to be stable at around USD 80-90 per bbl for 2H2023, which will underpin its performance for FY24F. Thus, we revise our forecast higher by 23% and 18%, FY24 and FY25 respectively. We upgrade our call to Trading Buy (from Neutral) with a revised DCF-based TP of RM1.20 (from RM1.18). Hibiscus declared a final dividend of 0.50sen per share, bringing total dividend for FY23 to 2.0sen.

• Topline dragged by lower volume and realised price. Hibiscus’ revenue dropped 42.0% YoY and 3.8% QoQ, mainly due to lower offtake volume recorded during the quarter. This is largely impacted by major maintenance campaign in North Sabah, which resulted in lower gross production by 9% QoQ, despite steady average uptime (Table 5). It also recorded lower average oil price for 4QFY23 (-32.0% YoY, -4.0% QoQ) as tensions from Russia’s invasion of Ukraine subsided (Table 2). However, the drop in revenue is mitigated by lower effective rate arising from deferred tax asset.

• FY24F Outlook. Hibiscus estimates to increase its sales volume by 6%-10% mainly from the Kinabalu field. Based on its offtake schedule, 1HFY24 is expected to deliver 12% higher volume than 2HFY23. As such, we believe it should deliver solid earnings growth for the next two quarters. This is also supported by stable Brent Crude price as OPEC+ has turned proactive in controlling its supply amid moderate global demand.

• Committed to growth. Hibiscus committed to spending USD415.8m within two years mainly for North Sabah and UK Teal West. North Sabah’s SF30 Water Flood Phase 2 development project, which entails the drilling of 5 Oil infill well and 6 Water Injector is expected to increase its production by 2,000 bbl/d or 10% from its overall current production level from FY25 onwards. As for the UK Teal West development, it expected to increase its production by 2,000 – 5,000 boe/d or 10%-25% of its overall current production level from FY26 onwards.

Source: PublicInvest Research - 24 Aug 2023