HSPLANT has concluded the divestment of Muul Hill Estate. Operational impact is marginal as the estate contributes only 2% of overall annual FFB output. However, the sale will swell an already large cash hoard further. BUY on generous dividends outlook. Dividend yield of 5-7% is expected for FY21-23 on strong cashflows on top of a sizeable cash surplus coupled with proceeds from this disposal.

HSPLANT announced that the proposed sale of seven parcels of agriculture land in Tawau, Sabah to parent company Hap Seng Consolidated Berhad (HSCB) has been concluded on 24 January 2022. First proposed in November 2021, it involved HSPLANT selling 624 Ha of agriculture land to HSCB for RM84.9m. All seven tracts are leasehold land due to expire between 2062 and 2003. Planted with matured oil palm, the estate produces about 15k MT of FFB or 2% of the Group’s yearly output. Impact on FY22E Core EPS earnings will thus be marginal but there will be a one-off disposal gain of RM23.4m.

We are expecting CPO prices to ease to about RM3,000 by the end of the year, giving an average CPO price of RM3,500 per MT for CY22. As our old FY22E CPO price was RM3,200/MT, we are raising HSPLANT FY22E CNP by 17% from RM121.3m to RM141.9m. For FY21, we are maintaining our CPO estimate of RM4,400 per MT along with our expected CNP.

Like many of its peers, robust cashflows can be expected from HSPLANT over FY21-23 but not many of its peers has a balance sheet as “liquid” as HSPLANT. It ended 3QFY21 with RM346m in net cash. With 4Q operating cashflow set to stay strong and this divestment bringing in RM84.9m cash in 1QFY22, we are expecting FY21 full-year net dividend to double from 7.0 sen in FY20 to 14.0 sen. As an interim 1.5 sen dividend was paid in Sept, an estimated final dividend of circa 12.5 sen is estimated for FY21. For FY22-23, dividends should hover around 10.0-11.0 sen.

Source: Rakuten Research - 25 Jan 2022