• Overview. 1Q20 core profits fell to RM16m (-84% yoy,-34% qoq) mainly due to lower oil sales volume amidst maintenance activities. The average realised oil price also declined to US$61.3/bbl (-20% yoy and -13% qoq).

• Key highlights. Crude oil sales volume dropped 46% yoy to 607k (- 23% QoQ). Average oil production eased 6% yoy and 3% qoq to 7,524 bpd as lower production from Anasuria was mitigated by higher net oil entitlement from North Sabah.

• Against estimates: Inline. 1QFY20 core profits were behind ours and consensus’ forecasts, making up only 4%/5%. However, we deem this as inline on expectations of higher facilities uptime and stronger production in coming quarters.

• Outlook. Hibiscus’ 3 infill wells drilling program at St Joseph (N. Sabah) and GUA-P2 (Anasuria) side-track project were completed in 1Q20. We expect this to contribute to higher production in coming quarters. For FY20, management expects to deliver 3.3-3.5m bbls of crude oil (FY19: 3.3m bbls).

• Marigold greenfield development. Hibiscus has decided tieback to a leased FPSO as its concept (Table 6). We view this positively as it will reduce the capex intensity and initial capital outlay.

• Our call. Maintain BUY with unchanged DCF-derived TP of RM1.50 (Table 5). We remain sanguine on Hibiscus’ growth potential amidst rising M&A opportunities as oil major continues to divest non-core assets. The weakness in share price presents an opportunity to accumulate.

Source: BIMB Securities Research - 22 Nov 2019