HLIB Research maintains ‘buy’ call on Hibiscus
Hibiscus Petroleum Bhd plans to achieve 35 to 50 kilo barrels per day (kbpd) by 2026 from its current rate of 22 kbpd.
Hong Leong Investment Bank Bhd (HLIB Research) said in a note with net incremental barrels coming from the recently drilled Bunga Aster-1 under PM3 CAA this month, as well as Teal West and South Furious 30 by year end, Hibiscus’s production rate will grow to 27 to 28 kbpd next year.
“To supercharge its production rate towards its ambition, Hibiscus is on the lookout for brownfield acquisitions.
“Although the mode of funding is uncertain at this time, management guided that the hurdle rate would be 15 per cent and a payback period of less than four
to five years,” it said.
The research firm has kept its “buy” rating on the stock with a RM3.20 target price.
Hibiscus recorded a core net profit of RM110.6 million in the second quarter.
“We expect sequential weakness in the third quarter given the lower guided offtake volume of 1.77 million barrel of oil equivalent, with a flattish average Brent oil price of US$82 per barrel.
“Nonetheless, we anticipate Hibiscus’s earnings to bounce back in the fourth quarter, backed by a higher guided offtake volume of 2.06 million barrels of oil equivalent
with the assumption that Brent price will stay above US$80 in the quarter.”
Hibiscus has earmarked US$200 million in capital expenditure (capex) each in financial years 2024 and 2025 for its producing assets, which are mainly used for UK Teal West development and North Sabah’s South Furious projects.
The research firm stated that the capex would be sufficiently funded by internally generated funds.
“Even if the price hovers at US$70 to US$80 per barrel, it will not warrant a drawdown from its existing debt facilities.”