Bimb Research Highlights

Author: kltrader   |   Latest post: Mon, 13 Jan 2020, 5:44 PM


Hap Seng Plants - Dragged by lower sales volume and ASP

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  • Overview. 2Q19 recorded a core loss yoy as lower ASP of palm products and sales volume of CPO dragged HAPL’s performance lower. On qoq basis, the loss was aided by lower ASP and sales volume of CPO and PK as well as higher unit production cost of CPO.
  • Key highlights. HAPL is highly exposed to weakness in palm products prices as it is a pure planter with single country (Sabah) exposure. The higher yoy production and sales volume fail to negate the lower ASP of CPO and PK.
  • Against estimates: below. 1H19 core profit was below ours and consensus’ estimates as weak ASP of palm products outweigh the higher sales volume of CPO and PK during the period.
  • Dividend. A 0.5sen DPS was declared, implying DY of 0.3% at current price; brings its total DPS to-date to 0.5sen (1H18: 1.5sen).
  • Outlook. We expect earnings growth this year might be dampened by low ASP realise of palm products that will partially offset the growth in FFB and CPO production, and volume transacted. Following this result, we tweaked our FY19 and FY20 earnings lower to RM9.4m (-73%) and RM27.3m (-52%) respectively as we adjusted our ASP of palm products, costs and plantation’s margin.
  • Our call. Maintain HOLD with new TP of RM1.44 (RM1.68 previously). Our TP is derived by applying P/EBITDA multiple on the next 12-months EBITDA/share estimates of 13.7sen and target P/EBITDA ratio of 10.5x.

Source: BIMB Securities Research - 29 Aug 2019

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