Decent end to FY23 for Hap Seng Plant
KUCHING: Hap Seng Plantations Bhd’s (Hap Seng Plant) results beat Kenanga Investment Bank Bhd’s (Kenanga Research) forecast but met with market expectations.
Its 4QFY23 adjusted core profit nearly doubled quarter on quarter (q-o-q) on lower costs and stronger-than-expected fresh fruit bunch (FFB) production.
“Hap Seng Plant’s FY23 core net profit of RM90 million (excluding RM1 million one-off gains) beat our forecast by seven per cent but met market expectation.
“The variance against our forecast came largely from lower costs,” Kenanga Research said.
Year on year (y-o-y), its FY23 top line declined 18 per cent because of a 29 per cent dip in crude palm oil (CPO) prices offset by a nine per cent uptick in FFB output.
Its core net profit plunged by a sharper 56 per cent due to tighter margins on higher FY23 input costs.
“Q-o-q, its 4QFY23 core net profit almost doubled QoQ on easier cost and strongerthan-usual harvest which rose sequentially to 0.181 million metric tonnes (MT), partially eroded by 4QFY23 CPO price that softened to RM3,800 per MT.
Hap Seng Plant ended FY23 with net cash of RM464 million.
Meanwhile, the research firm believed that CPO prices should stay firm going into FY24. This comes as global edible oils supply-demand in 2024 should stay fragile, more so than even last year.
“Demand is reverting back to three to four per cent y-o-y trend line growth. However, supply growth is shaky as Southeast Asian oil palm production could be entering a secular slow-down.
“We are keeping our forecast sector CPO prices at RM3,800 per MT over 2024-2025 but as Hap Seng Plant historically enjoys premium for its certified palm oil, the assumed CPO price for Hap Seng Plant is closer to RM4,000.
“We expect easier production costs ahead thanks to CPO selling prices holding firm; easier fertiliser and energy costs; and relatively steady yearly FFB harvest of 640,000MT for FY24FY25.
“Palm kernel prices are also expected to bottom out with possible modest uptick as buyers re-stock even as underlying demand is set to stay soft.”