• HAPL’s FY18 core PATAMI slipped 75% yoy to RM32m as revenue fell 30% to RM390.8m mainly due to lower sales volume and ASP.

• Overall, earnings was within our expectation but below consensus by 22%.

• On quarterly basis, PATAMI was at RM15.5m benefiting from higher sales volume and lower unit production cost of CPO.

• A 1sen dividend was declared, bringing total dividend to-date to 2.5sen.

• No changes in earnings forecast, however, we revised Target Price to RM1.90 from RM1.68 previously. Maintain HOLD.

Within expectation

Adjusted for loss in FV changes in biological assets of RM3.1m (FY17: loss of RM18.1m), HAPL’s FY18 core PATAMI of RM32.2m was in-line with our expectations. Revenue was down by 30% yoy owing to lower sales volume and ASP of CPO and PK. Sales volume of CPO and PK for the period dropped 12% and 1% respectively to 139,691 tonnes and 34,452 tonnes. On the other hand, CPO production was 0.2% higher at 657,260 tonnes, although PK dropped 1.4% yoy to 148,651.

Improved qoq earnings

On a quarterly basis, revenue and PATAMI increased 47% and 68% respectively to RM96.1m and RM6.1m, mainly due to higher sales volume of CPO and PK as well as lower unit production cost of CPO per tonne. The lower production cost per tonne was attributed to higher CPO production and lower total production costs due to timing variance of certain costs. Sales volume of CPO and PK were 73% and 70% higher to 40.2k tonnes and 11.4k tonnes respectively than 3Q18 (Table 2). The higher sales volume in the current quarter was mainly due to higher FFB production which was 48% and 45% higher than 3Q18.

Declared 1sen dividend

HAPL has declared second interim dividend of 1sen for FY18, bringing the total dividend approved to-date at 2.5sen (FY2017: 11sen) – translating into DY of 1.3%. The dividend will be payable on 27 March 2019.

Maintain HOLD with new TP of RM1.90

No change in our earnings forecast. However, we peg a target price of RM1.90 (RM1.68 previously) and maintain our HOLD recommendation for HAPL. Our target price is based on blended valuation based on 1) P/EBITDA multiple of RM1.68 (using next 12-months EBITDA/share estimate of 14.6sen and historical low 2-yrs average P/EBITDA ratio of 11.5x) and, 2) P/B multiple of RM2.12 (based on hist. 5-yrs average P/B of 1.1x and target BV/share of RM2.03).

Source: BIMB Securities Research - 27 Feb 2019