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HIBISCS: Earnings Beat Expectations on Cost Efficiencies, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A Malaysian-listed energy company reported robust financial performance, with its fourth quarter and full fiscal year 2023 core net profit exceeding market expectations. The strong results were primarily attributed to prudent capital management and significant cost efficiencies.
Performance Review
The company recorded a core net profit of RM159.1 million for the fourth quarter of fiscal year 2023 (4QFY23), leading to a full-year (FY23) core net profit of RM233.2 million. This full-year figure comfortably surpassed analysts’ forecasts, representing 105.2% of the investment bank’s estimate and 88.5% of the market consensus. The underlying net profit for 4QFY23 was particularly strong at RM81 million, bolstered by better-than-expected sales volume and effective cost controls.
Challenges and Operational Adjustments
Despite the strong financial outperformance, the company faced some operational headwinds, including a softer utilization rate for its support and services segment. The average daily production rate (DPR) for the Anasuria Cluster also saw a slight dip in 4QFY23 compared to the preceding quarter. These factors led to a downward revision of net profit forecasts for FY24 and FY25, primarily due to anticipated lower utilization rates, higher operating costs, and slightly reduced sales volumes in the respective periods.
Future Outlook and Strategy
Looking ahead, management remains optimistic, guided by a healthy order book and a commitment to prudent capital management. The company aims for a substantial increase in average daily production to 35,000 barrels of oil equivalent per day (boe/day) by 2026. This growth is expected to be driven by contributions from ongoing development projects in its key operational areas, including Marigold, Teal West, Bunga Raya 8, North Sabah Gas, and the Brunei Low Pressure Compressor Facility project. With a healthy order book and strategic project pipeline, the company is poised to achieve improved utilization and sustained growth.
Investment bank TA Securities has reiterated its “BUY” recommendation for the company, revising its target price upwards to RM0.25 from the previous RM0.20, representing a 25% upside. The upgrade reflects the company’s solid financial performance, robust cash flow generation, and strategic initiatives to enhance future production and profitability, despite near-term adjustments to operational forecasts.
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