• Hap Seng Plantations’ (HAPL) 9M16 net income of RM79.1m was in line with our expectation, making up 79% of our full year forecast.

• Revenue and profit before tax were 20% and 31% higher yoy to RM374.9m and RM107.8m respectively.

• The better results was mainly due to higher average palm product selling price realised although sales volume and production was marginally lower yoy.

• We are keeping our FY16 and FY17 earnings forecast unchanged, and maintaining our TP of RM2.52 on PER of 16x over FY17 EPS.

• Maintain HOLD recommendation.

Within expectation. Hap Seng Plantations’s (HAPL)’s 9M16 net profit of RM79.1m came in within our expectation and that of consensus’ estimates, which accounts to 79% and 78% of estimates respectively. The improvement in earnings was mainly due to higher average selling price realised in the period. EBIT margins improved to 28.3% from 25.6% in 9M15 as CPO and PK price realised increased 18% and 51% respectively to RM2,560/MT and RM2,370/MT.

Encouraging earnings. The higher average selling price realised for CPO and PK realised was dampened by lower sales volume of CPO and PK by 1% yoy. CPO production in 9M16 was lower by 3.7%, as dry weather in Sabah has negatively impacted FFB yield. As such, FFB production dropped 3.9% to 481,750 MT as compared to 501,347 tonnes recorded in 9M15.

Dividend. The Group has not proposed any interim dividend for the period and such, the total dividend declared to-date is 3sen for FY16.

Source: BIMB Securities Research - 24 Nov 2016