• HAPL’s 1H18 core profit slipped 74% yoy to RM15.1m as revenue fell 17% to RM229.1m due to lower production and average selling price of palm products.

• Overall, earnings came in below our and consensus expectations.

• On quarterly basis, core profit turned to a loss of RM3.3m as a result of lower ASP of palm products and lower sales volume of CPO and PK.

• Our earnings are currently under review pending updates from management. Similarly, we put our call and TP on the stock under review.

Below expectation

HAPL’s 1H18 PATAMI of RM19.4m was below our and consensus’ estimates. Revenue was down by 17% yoy owing to lower average selling prices of CPO and PK in spite of marginally higher sales volume of CPO and PK. The average CPO and PK price realized during the period was 18% and 23% lower to RM2,525MT and RM2,042/MT respectively from RM3,076/MT and RM2,658/MT previously in 1H17. HAPL is highly exposed to weakness in palm product prices as it is a pure planter with single country (Sabah) exposure.

Lower qoq earnings

On quarterly basis, revenue and net earnings fell by 11% and 75% respectively mainly due to lower sales volume of CPO and PK as well as lower ASP of CPO. Sales volume of CPO and PK were 2% and 17% lower to 37.8k tones and 7.4k tones respectively than 1Q18. FFB production during the period slipped 19% and 16% respectively to 131.6k tonnes and 30.6k tonnes due to changes in crop pattern, replanting activities and more young palms yet to reach maturity.

Declared 1.5sen dividend

HAPL has declared first interim dividend of 1.5sen vs. 5sen in the same corresponding period last year, payable on 28 September 2018. This would translate into DY of 0.7%.

Maintain HOLD pending review

Our earnings forecast and target price are currently under review pending updates from management.

Source: BIMB Securities Research - 29 Aug 2018