• HAPL’s FY17 revenue and PAT was 10.3% and 8.6% higher yoy to RM555.1m and RM134.8m respectively, benefiting from higher CPO sales volume and ASP realized of CPO. This was 7% above our full year PAT forecast.

• PBT of RM59.1m in 4Q17 was higher by 72% qoq (-0.4% yoy) mainly attributable to higher sales volume of CPO and PK, benefiting from favorable inventory movement and higher FFB and CPO production.

• HAPL has declared a second interim dividend of 6sen in 4Q17, bringing total dividend approved to-date for FY17 at 11sen (FY16: 11sen), payable on 28 Mac 2018.

• We retained our FY18 and FY19 earnings forecast with TP of RM2.89 on FY18 PER of 16x. Maintain BUY.

Earnings above expectation

HAPL’s FY17 net profit of RM134.8m was 7.2% above our expectation of RM125.7m. The improvement in earnings was mainly due to higher sales volume and ASP of CPO which increased by 4% and 9% respectively to 158.6k tonnes and RM2,890/MT. However, EBIT margin was slightly lower at 32% (FY16: 33%) as reported operating expenses increased 12.9% to RM388.5m. On qoq basis, PBT of RM59.1m was higher by 72% (-0.4% yoy), attributable to higher sales volume of CPO and PK benefiting from favorable inventory movement and higher FFB and CPO production. The lower yoy result was due to lower ASP realized of CPO and PK.

Second interim dividend

HAPL has declared second interim dividend of 6sen during the quarter, bringing total dividend approved to-date at 11sen (FY16: 11sen). At current market price, this would translate into DY of 4.4x.

Maintaining forecast

We make no changes to our FY18 and FY19 earnings forecasts of RM144.4m and RM151.1m respectively. We believe earnings performance could sustain given that c. 74% of the Group planted areas are in the prime age bracket that can earn optimal yield when production begins to improve in 2H18. Maintain BUY with unchanged TP of RM2.89 based on PER of 16x (2-yrs average) and FY18 EPS.

Source: BIMB Securities Research - 28 Feb 2018