PETALING JAYA: Hap Seng Plantations Holdings Bhd’s second-half (2H) earnings are expected to be better than its 1H on the back of higher sales volume and crude palm oil (CPO) prices, according to CGS International Research (CGSI Research).
The company’s second quarter of the year (2Q24) CPO average selling price (ASP) was RM4,247 per tonne, higher than the Malaysian Palm Oil Board Sabah CPO spot price of RM4,038 per tonne.
The research house stated it was worth noting that Hap Seng Plantations’ CPO ASP was always higher than its peers due to its sustainability-related and food-grade certifications.
“CPO production was lower by 5% year-on-year (y-o-y) in 1H, contributing 48% of our full-year assumption. We expect higher CPO production in 2H, which is the peak season.
“The lower CPO production in 1H was mainly due to lower fresh fruit bunch (FFB) production that was affected by seasonal yield trends and changes in cropping patterns, lower external FFB purchases and a lower oil extraction rate,” the research house stated in a recent report on the company.
Hap Seng Plantations’ 2Q24 core net profit came in at RM32.2mil, an increase of 31% quarter-on-quarter and up 136% y-o-y after excluding net future-value adjustments for biological assets of RM4.47mil, as well as property, plant and equipment write-offs of RM30,000.
This brought its 1H24 core net profit to RM56.7mil, making up 43% of the brokerage’s full-year forecast and 52% of Bloomberg’s consensus.
The company declared an interim dividend of 1.5 sen per share, similar to last year.
Reiterating its “add” call on the stock with an unchanged target price of RM2.25 a share, the research house said downside risks include any volatile weather phenomenons such as La Nina and the recent sooty mold outbreak in Sabah, which may negatively impact its FFB yields.
