• Maintain HOLD (TP: RM1.85) Hap Seng Plantations (HAPL) FY23’s core PATAMI of RM89.5mn (-58% YoY) was above our and consensus’ estimates, accounting for 132% and 108% of full year forecast respectively. The variance from our projection was primarily attributed to higher-thananticipated average selling price (ASP) of palm products and production for FFB and CPO during the period. The company declared a 2nd interim DPS of 5.3sen which is lower than 4Q22 DPS of 7.0sen, bringing total DPS for FY23 at 6.8sen (FY22: 12sen). Upgrade to a HOLD call with TP of RM1.85 (RM1.70 previously); based on hist. low 3-year avg. P/BV of 0.75x and HAPL’s FY23/24F’s BV/share of RM2.46.

• Key highlights. In 4QFY23, HAPL’s revenue increased by +6% QoQ/+22% YoY to RM175mn, mainly due to a higher sales volume of CPO and PK, increasing by 8%/32% and 17%/10% respectively to 39,824 tonnes and 9,584 tonnes (Table 2). Hence, the group’s core PATAMI jumped by +92% QoQ/+34% YoY, thanks to lower finance costs and lower effective tax rate during the period.

• Earnings Revision. In view of higher FFB and CPO/PK production during the period, we revised our FY24 earnings forecast higher to RM84.6mn from RM60.7mn previously, as we revisit our assumptions on production to be more reflective of our current and future expectations.

• Outlook. We deem the results for this financial year as satisfactory though we may see a potential downside risk to our earnings forecast owing to 1) low productivity due to lower yield and possible impact of dry weather, 2) higher operating costs, and 3) lower than-expected CPO prices which could drag HAPL’s earnings – given pure planter’s earnings are highly correlated to ASP of palm products and production.

Source: BIMB Securities Research - 28 Feb 2024