• Overview. 4Q19 headline PATAMI fell 75% yoy due to one-off negative goodwill in 4Q18 worth RM93.8m. Excluding this, Hibiscus’ 4Q19 performance saw core earnings returning to black on higher crude oil sales volume.

• Key highlights. Crude oil sales volume grew 27% yoy to 792k (-4% QoQ). Total oil production was 17% lower yoy to 7,719 bpd (+3% qoq) due to lower production from both assets.

• Against estimates: Below. FY19 core profit of RM234m (>100%yoy) were behind ours and consensus’ forecasts at 88%/82%. The shortfall was mainly due to higher-than-expected effective tax rate.

• Outlook. Hibiscus’ production enhancement projects are on-going at both oil fields. We expect this to grow its oil sales volume by 23% to 4m bbls in FY20F from 3.3.m bbls in FY19.

• Marigold greenfield development. Hibiscus has appointed UK’ Genesis Oil and Gas for pre-FEED work to finalise the development concept which could be a subsea tie-back, FPS or fixed platform.

• Our call. Maintain BUY with unchanged DCF-derived TP of RM1.50. We remain sanguine on its long term growth plan to develop Marigold oil field. However, current lower crude oil price could weigh on share price. Buy on weakness.

Source: BIMB Securities Research - 21 Aug 2019