CGSI Research expects a higher dividend of 8.4 sen per share in the second half of this year.
PETALING JAYA: With crude palm oil prices (CPO) to remain elevated, analysts expect Hap Seng Plantations Holdings Bhd to record a strong fourth quarter (4Q24) where earnings is likely to be the highest for the financial year this year (FY24).
In 3Q24, its core net profit stood at RM43.7mil, up by 36% quarter-on-quarter (q-o-q) and 92% year-on-year – bringing the nine-month figure to RM100.4mil.
The performance was due to lower costs of production, higher fresh fruit bunch (FFB) production and a higher CPO average selling price (ASP).
“Note that revenue in 3Q24 was down by 3% q-o-q and we suspect there may be higher inventory, given the strong CPO production during the quarter which increased by 25% from the previous quarter.
“We expect 4Q24 earnings to be the highest for FY24,” said brokerage firm CGS International Research (CGSI Research).
It said the CPO price has spiked by 21% from October 2024 to date.
According to the research firm, the ASP of Hap Seng Plantations’ CPO tends to be higher than its peers.
This is given its sustainability-related and food grade certifications.
“In 3Q24, the CPO ASP was RM4,098 per tonne, higher than the Malaysia Palm Oil Board Sabah’s CPO spot price of RM3,981.”
It said the stock is trading at an undemanding valuation of 12 times FY25 price-earnings, which is lower than its five-year mean of 15 times.
Based on its dividend payout assumption of 60%, CGSI Research expects a higher dividend of 8.4 sen per share in the second half of this year.
This would translate into a dividend yield of 5% to 6% for 2024.
“Given its strong balance sheet and good cash flow over the past two to three years, we see the possibility that the dividend payout may be even higher than our expectation,” the research firm said.
It reiterated its “add” call on the counter with a RM2.25 target price (TP).
Meanwhile, Apex Research has a “hold” recommendation with a TP of RM2.20.
It is keeping earnings forecast unchanged given that the group’s reported core net profit came in-line within expectations.
“Year-to-date until October 2024, FFB production of 532,000 tonnes is on track with our estimation at 82%, but slightly shy of the group’s guidance at 76%.
“Moving forward, we foresee Hap Seng Plantations to record stellar earnings in 4Q24 as CPO prices are expected to remain elevated until 1Q25,” elaborated Apex Research.
