Hibiscus Petroleum’s (Hibiscus) reported headline profit of RM203.7m (+92% YoY) largely driven by a negative goodwill amounting to RM206.3m. Excluding this coupled with other exceptional items, FY18 core net profit jumped by 192.8% YoY to RM65.2m on the back of a 50.9% increase in revenue. The results were below our and consensus expectations making up only 48.3% and 91.6% respectively. The variation on our part was due to our expectation of two lifting in June 2018 from Anasuria field. For the first three quarters in FY18, performance was solely contributed by its Anasuria asset while the 4QFY18 was mainly aided by the North Sabah field upon completion of its acquisition on 31st March. There were no offtakes during the quarter from Anasuria as it was postponed to 2nd July 2018 due to operational efficiencies and safety concerns. FY19 will undoubtedly be a more exciting year as there will be full contribution from the North Sabah asset and higher levels of production from both assets at a combined value of about 9,500bbls/day, coupled with the steady-state in crude oil prices at USD60-70/bbl. Our Outperform rating on the stock is reaffirmed with a higher DCF derived TP of RM1.73 (RM1.08 previously), largely on account of higher crude oil prices assumed (USD60/bbl vs USD50/bbl) and changes in production and reserves assumptions.

• North Sabah kicked-in... Upon completion of the 50% stake acquisition in March this year, this asset has contributed RM181.9m to revenue and RM96.9m to the Group’s gross profit from the sale of crude oil. The Group sold 623,544 bbls in 2 cargoes at an average price of USD73.26/bbl. Average production rate has increased slightly by 4% while the uptime is consistent at above 90% level. OPEX for the quarter reduced 37% to USD8.15/bbl, it is expected to increase however, in line with higher maintenance activities.

• …while Anasuria was on hold, albeit temporarily. There were no offtakes during the quarter as it was deferred to 2nd July 2018 due to operational efficiencies and safety concerns. However, we have been told that the Group has successfully completed two crude oil offtakes within these two months, equivalent to 524,432 bbls from this field. This will only be reflected in 1QFY19 numbers. For full-year FY18, there were 3 offtakes, equivalent to 791,822 bbls of crude which was sold at an average price of USD60.11/bbl. Average uptime was 76% due to a planned shutdown in Sept to Oct last year and a temporary malfunction of the Cook-P1 subsea production choke as well as the gas compression facility.

Source: PublicInvest Research - 30 Aug 2018