Overview. HAPL’s 3Q21 core PBT came in higher yoy to RM67.5m against RM29.8m in 3Q20 as higher ASP realised of CPO and PK is far from sufficient to compensate for the decline in productions and sales volume of CPO and PK as well as higher operating costs. On quarterly basis, the core PBT was flat, thanks to the lower operating expenses amounting RM108.6m incurred during the period versus RM121.3m in 2Q21, offsetting the lower revenue that affected by lowersales volume and lower ASP realised of CPO and PK.

Against estimates: Above. Results were above our estimates. Revenue and core PBT in the 9M21 increased 51% and more than 100% respectively to RM476.0m and RM167.7m, backed by higher ASP of CPO and PK, and lower finance costs of RM1.75m against RM1.90m incurred in 9M20. The gain/loss on disposal of PPE and FV changes in biological assets were the key variances in our core earnings.

Outlook. We believe the higher CPO price will amplify the revenue and earnings growth momentum for HAPL in FY21/22. We foresee that the increasing higher CPO price should benefit HAPL as its spot strategy has widened its ability to ride on riding spot price. As such, its long-term prospect remains promising given its strong balance-sheet with a net cash position, experienced management and one of the largest producers of sustainable palm oil in Sabah. Fundamentally, we believe HAPL has excellent financials to diversify its earnings and contribute to long-term growth, if the need arises.

Our call. Following this result, we revised our FY21/FY22 earnings forecast higher to RM173m and RM123m respectively from RM141m and RM98.9m previously as we adjusted our assumptions on costs and margins including tax and levy. Maintain BUY with new TP of RM2.36 versus RM2.17 previously, based on 5-years avg. mean P/B of 1.0x and avg. FY22/24 BV/share of RM2.36.

Source: BIMB Securities Research - 25 Nov 2021