HIBISCS: Energy Sector Player Navigates Q1 Profit Dip, Eyes Stronger Production and Strategic Growth Ahead
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading energy sector player reported a significant decline in its core net profit for the first quarter of fiscal year 2026, falling short of both analyst and consensus estimates. The dip was primarily attributed to lower sales volumes and softer realised oil and gas prices during the period.
Performance Review
The company’s 1QFY26 core net profit stood at RM20.1 million, marking a substantial decrease of 73% quarter-on-quarter (QoQ) and 71.4% year-on-year (YoY). This performance met only 8.8% of full-year estimates by both the investment bank and market consensus. The lower performance was largely driven by scheduled maintenance activities across its Brunei MLJ, Kinabalu, and PM3 CAA fields, alongside an unplanned shutdown at Anasuria. These operational interruptions led to a significant reduction in oil offtake volume, down 34.7% QoQ and 11.1% YoY, partly due to the absence of an offtake from the PM3 CAA field following its annual major maintenance. Gas export volumes also experienced a 9.5% QoQ decline. The overall sales mix was less favourable, with a higher proportion of lower-margin gas contributing to the subdued earnings.
Future Outlook and Strategic Initiatives
Despite the challenging first quarter, the outlook for the company remains positive, with forecasts maintained by the investment bank. A significant ramp-up in production is anticipated from the second quarter onwards, bolstered by normalised uptime and improved operational performance. The company has revised its FY26 offtake guidance upwards to 9.0-9.4 million barrels of oil equivalent (MMboe), from the previous 8.8-9.3 MMboe. Furthermore, it reaffirmed its commitment to an 8-10 sen dividend, aligning with current assumptions.
Production is expected to strengthen considerably in the coming quarters, primarily driven by the ongoing Teal West development, which is on track for first oil by mid-2026, and the completion of the Brunei Low Pressure Compressor (LPC) project, scheduled for start-up in 1QCY26. These projects are expected to materially boost output, extend field plateau rates, and unlock additional reserves.
In addition to operational improvements, the company is actively engaged in strategic discussions with potential investors, which could involve share swaps or asset injections aimed at accelerating long-term growth and potentially re-rating the stock. The company is also exploring strategic collaborations in the power sector, leveraging its existing offshore power-generation capabilities to pursue decentralised power opportunities, particularly for data centers and the semiconductor industry.
Investment Bank’s Stance
The investment bank reiterates its BUY recommendation, maintaining a target price (TP) of RM0.25, indicating a potential upside of 25.0% from the last traded price of RM0.20. While crude oil price softness remains a downside risk, the overall strategic direction and improved production outlook underpin the positive sentiment.
