• Overview. HAPL’s 4Q20 PBT came in higher yoy/qoq to RM50.1m against RM31.6m in 4Q19 and RM33.9m in 3Q20 as revenue increased 23%/19% to RM153.3m on account of higher ASP realised CPO and PK (Table 2).

• Key highlights. During the twelve-month period, there was a gain recorded at PBT and PAT level amounting RM12.8m and RM6.5m respectively together with a reversal of deferred tax of RM14m arising from the Proposed HSP (LK) Disposal [proposed disposal of 8 parcels of agricultural land at Tawau to subsidiary of Hap Seng Consolidated, for cash consideration of RM75.99m].

• Against estimates: Above. Results were above our estimates. Revenue for FY20 increased 12% to RM467.6m on higher average selling price realisation (table 2). The improvement in earnings was supported by lower operating expenses (FY20: RM391.13m against FY19: RM398.98m) and lower effective tax rate of 16.7% during the period.

• Dividend. Board has approved a second DPS of 5.5sen for 4Q20, bringing total dividend to-date of 7.0sen for FY20 (FY19: 2.5sen) to be payable on 24 March 2021; translating to DY of 3.8%.

• Outlook. We believe that HAPL’s earnings upside in the next quarter would be visible as it is highly exposed to movement in palm product prices. Nonetheless, we believe earnings upside might be limited and/or at risk by the low FFB and CPO production, higher operating costs and slower demand.

• Our call. No adjustment was made to our earnings forecast. Maintain BUY with TP of RM2.07, pending review, based on 3-years average BV/share of RM2.07 and target P/BV of 1.0x.

Source: BIMB Securities Research - 25 Feb 2021