Thursday 28 Mar 2024
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This article first appeared in Capital, The Edge Malaysia Weekly on November 28, 2022 - December 4, 2022

Hibiscus Petroleum Bhd

Target price: RM1.56 BUY

HONG LEONG INVESTMENT BANK RESEARCH (NOV 23): Hibiscus reported a 1QFY23 core net profit of RM135.3 million. We deem the results to be within expectations at 25% of both our and the consensus full-year estimates, respectively.

Core net profit fell 47% q-o-q due to a significantly lower offtake volume of 1.5 million barrels of oil equivalent (boe) in 1QFY23 and a lower average realised crude oil price across all of its major assets throughout the quarter.

Core net profit grew more than three times y-o-y due to recognition of Fortuna International Petroleum Corp (FIPC) assets’ sales volume in 1QFY23 — Kinabalu Oil and PM3CAA as well as significantly higher realised crude oil prices y-o-y across all of its major assets throughout the quarter.

Our key takeaways from our post results discussion with Hibiscus’ key management team:

(i)    The subsea riser for the group’s Anasuria asset has been successfully replaced.

(ii)    Management has guided that the 1Q of every financial year will be the heavy maintenance quarter annually.

(iii)    Realised gas prices in the PM3CAA asset dipped 28% q-o-q to US$5.78 (RM25.93) per mscf. The group has guided for slightly lower gas prices over the next few months because of a huge influx of supply post-embargo of Russian refined products in the Asian market.

(iv)     The group has guided for its tentative offtake volume schedule for the next two quarters, which is 2.1 million boe and 1.8 million boe for 2QFY23 and 3QFY23, respectively. Also, the group has added that it remains on track to sell a total of about 7.2 million to 7.5 million boe in FY23.

(iv)     We highlight that the group is currently in discussion with Petronas and PetroVietnam to extend the recently acquired PM3CAA’s producing licence by another 10 years (till 2037). If approved, Hibiscus aims to drill more wells for the asset in 2024-2025. We gather that the minimum project IRR for Hibiscus to take on this extension and additional capex stands at 15%.

(vi)    Tentatively, Hibiscus is targeting a total offtake volume of 7.2 million to 7.5 million boe for FY23.

(vii)    Hibiscus expects the first oil for the Teal West asset to be in mid-CY24 and Waterflood Phase 2 to be in 2HCY24.

Pavilion Real Estate Investment Trust

Target price: RM1.56 BUY

MIDF RESEARCH (NOV 23): Pavilion REIT announced that it has entered into a conditional sale and purchase agreement (SPA) with Regal Path Sdn Bhd for the acquisition of Pavilion Bukit Jalil for an aggregate purchase consideration of RM2.2 billion. Pavilion REIT also proposed the private placement of Pavilion REIT units in two tranches to raise up to RM1.27 billion to fund the acquisition. The proposed acquisition is expected to be completed in 2QCY23.

The purchase consideration of RM2.2 billion is expected to be funded by RM1.27 billion in proceeds from private placements and bank borrowings or internal funds. Pavilion REIT’s gearing is expected to increase to 0.38 times from 0.35 times if it raises RM1 billion in bank borrowings to fund the acquisition. Meanwhile, the acquisition is expected to be earnings and EPU accretive. We estimate FY23 earnings and EPU to increase by 37.9% and 3.3%, respectively, on an annualised basis, post acquisition and private placement.

We make no changes to our earnings forecast for FY22/FY23F pending completion of the acquisition and private placement.

Telekom Malaysia Bhd

Target price: RM7.30 ADD

CGS-CIMB RESEARCH (NOV 22): 3Q22 Ebitda rose 17.4% y-o-y on stronger-than-expected revenue growth. However, core EPS was down 2% y-o-y due to higher effective tax rate.

3Q22 total revenue grew 12.7% y-o-y. Data services revenue jumped 25.8% y-o-y on continued growth in domestic fibre leasing, higher indefeasible right of use (IRU) sales and sustained y-o-y growth at TM One. Meanwhile, higher revenue from ICT solutions & services (TM One), data centres and content delivery network (CDN) services helped other revenue grow by 26.7% y-o-y.

Internet revenue grew 7.3% y-o-y. Unifi net adds further eased but is still robust at 115,000. Average revenue per user (Arpu) fell more than expected, possibly due to a higher mix of lower-end subs in 3Q22’s net adds.

3Q22 Ebitda margin expanded 1.6% pts y-o-y to 39%, stemming from revenue growth, lower other opex and flattish staff costs. 9M22 Ebitda margin of 40.1% is tracking slightly ahead of our projected FY22F margin of 39.0%.

TM remains our top Malaysian telco pick due to its strong 30.8% FY21-FY24F core EPS CAGR, which is a key rerating catalyst.

RCE Capital Bhd

Target price: RM1.67 HOLD

MAYBANK INVESTMENT BANK RESEARCH (NOV 22): 2QFY23 net profit of RM37 million brought 6MFY23 net profit to RM69 million, which was within our expectation at 52% of our FY net profit. On closer inspection, the 6MFY23 revenue of RM159 million and the 6MFY23 credit cost of RM15 million were both higher than expected. The former was due to higher early settlement and fee income, which we gather was driven by customers refinancing ahead of profit rate hikes. The latter was due to teachers and academic staff resigning.

We note that financing growth accelerated to 3% q-o-q. We gathered that customers were borrowing more ahead of profit rate hikes and to cope with rising living costs.

We were pleasantly surprised that RCE declared an interim DPS of five sen and a special DPS of 18 sen. Needless to say, we did not expect the special DPS. The interim DPS of five sen was also above our expectation of 3.8 sen; it implied a 53% DPR whereas we expected 42%. RCE did not want to commit to a higher DPR for the whole financial year, but said there is room for it to improve. We maintain our FY23E DPS at 7.5 sen.

 

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