• Overview. HAPL’s 1Q22 core PBT came in higher yoy to RM97.4m against RM32.8m in 1Q21 as revenue increased 100% to RM242.2m on account of higher production, sales volume and ASP realised for CPO and PK. A gain of RM18.8m arising from the completion of the Hap Seng Plantation (Ladang Kawa) disposal is the variance in core profit. On a quarterly basis, a 1% drop in core PBT was a result of lower production and lower sales volume of PK, although ASP realised of CPO and PK increased significantly by 18% and 25% respectively to RM6,019/MT and RM4,702/MT.

• Against estimates: Above. Results were above our estimates.

• Outlook. We see a strong visibility on HAPL’s earnings in the next quarter amid a rally in palm product prices especially CPO which is currently trading above RM5,000/MT. Earnings upside may be capped however by the low FFB and CPO production, and higher operating costs.

• Our call. Following this result, we revised our FY22 earnings forecast higher to RM274.8m from RM189.8m previously as we revised our assumptions on ASP of palm products, margins, EI, costs and expenses to be more reflective of our current and future expectations; to arrive at a new Target Price of RM2.90 from RM2.64 previously, based on 5-years avg. mean P/BV of 1.11x and average FY22/23 BV/share of RM2.60. As HAPL’s share price has risen by 169% YTD, we now see the stock reaching our valuation. Hence, changed our recommendation from a BUY to a HOLD. As such, we advise investors to take any stock price rally as an opportunity to lock in their profit.

Source: BIMB Securities Research - 26 May 2022