• Hap Seng Plantations (HAPL) 9M17 earnings of RM88.9m was in-line with our expectation, making up 71% of our full year forecast.

• Revenue and PBT were 4% and 11% higher yoy to RM391.2m and RM119.5m respectively, mainly from higher ASP realized.

• PBT of RM34.4m in 3Q17 was lower by 13% qoq and 40% yoy as a result of lower CPO and PK sales volume as well as lower ASP realized.

• We retained our FY17 and FY18 earnings forecast, and maintained our TP of RM2.89 on FY18 PER of 16x.

• Maintain BUY recommendation.

Within expectation

HAPL’s 9M17 net profit of RM88.9m came in within our expectation. The better earnings was mainly due to higher average selling price realized for CPO and PK – up by 16% and 9% respectively to RM2,977/MT and RM2,584/MT. The increase in ASP realized has more than off-set the lower FFB and CPO production during the period. As such, EBIT margin improved to 30.4% from 28.5% in 9M16.

FFB and CPO production in 9M17 was lower by 4% and 8% respectively to 462k tonnes and 106k tonnes due to the lingering effect of dry weather which effected the seasonal yield trend and crop patterns in Sabah.

Lower qoq earnings

On qoq basis, revenue and net earnings fell by 15% and 10% respectively mainly due to lower sales volume of CPO and PK as well as lower ASP of CPO. On yoy basis, revenue and net earnings fell by 29% and 39% respectively to RM113.6m and RM25.9m as a result of lower sales volume of CPO and PK as well as lower ASP of PK during the period.

Maintaining our numbers

We make no changes to our FY17 and FY18 earnings forecasts at RM125.7m and RM144.6m respectively. Maintain BUY with unchanged TP of RM2.89 based on PER of 16x (2-yrs average) and FY18 EPS.

Source: BIMB Securities Research - 21 Nov 2017