• FY23 core net profit of RM100m (ex-EI) was above both our and Bloomberg consensus expectations, at 110% and 121% of the respective forecasts.

• 4QFY23 core net profit (ex-EI) grew 31% yoy due to 1) higher CPO and PK sales volume, and 2) lower effective tax rate.

• Reiterate Hold, with a GGM-derived TP of RM1.75, implying 13x CY24F P/E.

FY23 results above; 5.3 sen DPS declared

• Hap Seng Plantations (HSPL) reported FY23 core net profit of RM100m (excluding FV loss on biological assets, gain on disposal of PPE, and write-offs of PPE), above both our and Bloomberg consensus expectations, at 110% and 121% of the respective forecasts, due to higher FV loss on biological assets. However, FY23 headline net profit

• FY23 core net profit plunged 55% yoy, primarily due to lower average crude palm oil

• 4QFY23 core net profit of RM42m (ex-EI) grew 31% yoy, driven by 1) higher sales volume of CPO (+32% yoy to 39,824 tonnes) and PK (+10% yoy to 9,584 tonnes), offsetting lower average selling prices for both CPO (-5% yoy to RM3,798/MT) and PK (-5% yoy to RM2,128/MT); and 2) lower effective tax rate at 21.6% vs. 31.9% in 4Q22.

• HAPL declared a second interim DPS of 5.3 sen, bringing total DPS for FY23 to 6.8 sen (FY22: 12 sen), in line with our estimate but below Bloomberg consensus estimate of 7.1 sen. FY23 DPS of 6.8 sen translates to a payout of 60% of its net profit.

Reiterate Hold, with an unchanged GGM-derived TP of RM1.75

• We maintain our FY24-25F earnings forecasts for now, pending more clarity from management during its analyst briefing on 29 Feb 2024. Nevertheless, we anticipate HAPL’s net profit to rebound in FY24-25F by 15-20%, driven by higher FFB output and

• Our Hold recommendation on HAPL remains unchanged, with GGM-derived TP of RM1.75, implying 13x CY24F P/E. Considering the company's estates are only in Sabah and its limited avenues for diversification, we deem a 13x implied P/E fair. More aggressive utilisation of its net cash balance sheet (either to raise payouts or expand acreage) could serve as re-rating catalysts.

• Upside risks include strong CPO production offsetting the weaker CPO prices, higher- than-expected FFB production, and increase in dividend payout. The opposite of the aforementioned are downside risks.

Source: CGS-CIMB Research - 27 Feb 2024