Results Within Expectations, No Major Surprises

HAPL’s 1Q17 core net profit more than doubled yoy to RM33.6m, which came in within our and consensus expectations. This was mainly underpinned by higher CPO and PK ASPs. As a result, no changes were made to our 2017-19 core earnings forecasts. Maintain HOLD rating on HAPL though with a higher TP of RM2.74 as we roll forward our valuation horizon to 2018.

1Q17 Core Net Profit More Than Doubled to RM42.5m

Hap Seng Plantation’s (HAPL) 1Q17 revenue increased by 38.3% yoy to RM144.1m while PBT almost doubled yoy to RM45.4m. This was largely underpinned by: 1) higher CPO and PK ASPs of RM3,268/MT (1Q16: RM2,375/MT) and RM3,282/MT (1Q16: RM2,029/MT), respectively; and 2) higher sales volume of PK, up 3% yoy to 7,183 MT. EBITDA margin in 1Q17 also improved to 35.5% as compared to 27.3% in 1Q16, attributable to the higher CPO and PK prices.

Results Within Expectations

After excluding one-off items, HAPL’s 1Q17 core net profit doubled yoy to RM33.6m. This was largely within our expectations, accounting for 24.4% of our 2017 forecast and 24.3% of the street’s.

Maintain HOLD Rating on HAPL But With Higher TP of RM2.74

We leave our 2017-19 core EPS forecasts unchanged as there were no major surprises in HAPL’s results. However, our target price for the stock has been raised to RM2.74 (from RM2.58 previously), as we roll forward our valuation basis to 2018E and based on an unchanged PER target of 15x. We maintain our HOLD rating.

Key Risks

Key upside/downside risks include: 1) a stronger/weaker economic growth leading to a higher/lower consumption of vegetable oils; 2) a sustained rebound/plunge in the CPO price; 3) higher/lower-than-expected FFB and CPO production; and 4) changes in policies.

Source: Affin Hwang Research - 25 May 2017