Much like most plantations companies, Hap Seng Plantations Holdings Bhd appears to be back on investors’ radar. The counter has seen high trading volume sending it to a rising momentum, creeping up to the year high of RM2.06.

Fundamentally, analysts are positive on the counter as crude palm oil (CPO) prices are expected to stay firm at RM4,000 per tonne in FY24.

With strong CPO prices, the plantation outfit can register higher revenue as it hopes to achieve a fresh fruit bunches (FFB) production growth of 10% in FY24.

Thankfully, Hap Seng Plantations has not experienced adverse weather conditions in its oil palm estates in Sabah.

The increase in FFB output in FY24 is expected to be underpinned by enhancements in FFB yields. Its FFB yield is expected to be 21.9 tonnes/ha in FY24 compared with 19.7 tonnes/ha in the previous year. While yield is anticipated to increase, cost of production is expected to decline to RM2,200/tonne in FY24. This is on the back of lower fertiliser costs and a higher volume of production.

In FY23, the production costs was RM2,562/tonne, which was slightly higher than RM2,559/tonne in FY22. Higher costs of upkeep and wages were compensated by the strong growth in FFB production in FY23. Meanwhile, Hap Seng Plantations is expected to replant 923ha of ageing oil palm trees in FY24 compared to 829ha in FY23.

However, investors may be concerned over its latest results. On a full financial year basis, Hap Seng Plantations posted lower net profit of RM91.4 million compared with RM210.3 million. This was on the back of lower revenue of RM667.8 million versus RM814.6 million.

The company was affected by lower average selling price of all palm products but mitigated by higher sales volume of CPO and palm kernel. It also saw lower loss from fair value adjustments of biological assets of RM8.1 million as compared to RM29.2 million in the preceding year.

In addition, the group’s PBT and PAT in the preceding year also included a gain of RM18.8 million and RM26.5 million respectively arising from the completion of disposal of assets held for sale.

Despite the poorer full year results, analysts believe the counter deserves a premium as its FFB output growth is one of the highest in Malaysia. Furthermore, it is currently trading at a decent FY24 PE of 12x vs. its 2-year peak of 16x, hence there is room for investors to make some gains in the near term.