• 4QFY18 core earnings slipped into the red on higher tax credit recognition and deferment of crude oil offtakes at Anasuria.
• Overall, FY18 core earnings grew 48% yoy, propelled by strong 9MFY18 performance with the setback in 4QFY18 resulted in overall earnings falling short of our forecast at only 73%.
• We retain our HOLD recommendation with an unchanged DCF derived TP of RM0.97. We still like its long term prospect from rejuvenation works at North Sabah and Anasuria.

Turned to core loss on higher tax charges

4QFY18 headline profits soared to RM99m from RM9m mainly on negative goodwill gained from the North Sabah PSC worth RM94m as well as unrealised forex gain of RM8m. Stripping this out, Hibiscus’ bottomline slipped into the red amidst higher tax expenses. Overall, FY18 core profits of RM38m were below ours and consensus forecast at 73% and 41% respectively.

Revenue more than double QoQ

On quarterly basis, Hibiscus’ 4QFY18 revenue more than doubled to RM185 mainly as it sold 2 cargoes of crude oil (or 623k bbl of crude oil) from North Sabah as compared to only one offtake from Anasuria in 3QFY18. There was no crude oil sale from Anasuria in 4QFY18 as the company deferred it to 1Q19 amidst the drilling of Guillemot-A P2 side track well that commenced on 4th June and will last until early Sept.

Some silver lining – facilities uptime was excellent

Despite zero offtake from Anasuria, facilities uptime was sustained at 94%. This led to improvement in average production to 3.4k bpd from 2.8k bpd in 3QFY18. North Sabah also saw a strong 96% uptime. This boosted average production to 16k bpd (3QFY18: 15.3k bpd). On the sales volume, the company has indicated that it already took 2 crude oil offtakes totalled to 523k bbls from Anasuria as of Aug 2019 (i.e. 1Q19), partly from inventory accumulated during 4QFY18.

Retain HOLD with unchanged TP of RM0.97

Despite FY18 earnings came below our expectation, no change was made to our forecast pending updates from analyst briefing later today. We still like the long term prospect of the company arising from rejuvenation works of the North Sabah PSC and Anasuria. We opine that current share price has more than reflect its fair value, hence give opportunities to realise some profits and revisit the stock at lower level.

Source: BIMB Securities Research - 30 Aug 2018