KUALA LUMPUR (Oct 5): Shares in Hibiscus Petroleum Bhd jumped 12.1% in active trade early on Wednesday (Oct 5) following an upgrade of its rating and target price.
At 9.36am, the counter had risen 10.5 sen to 97.5 sen, with 24.45 million shares done.
PublicInvest Research has upgraded its rating of Hibiscus to “trading buy” at 87 sen, with a higher target price of RM1.18 (from RM1.05), and said the company, which was previously against the imposition of sales tax on two operating assets in Sabah, had proceeded to pay the tax amounting to RM85.7 million to the state government.
In a note on Wednesday, the research house said Hibiscus' management had clarified that this was to create a stable environment for continuing investment and smooth operations in Sabah.
PublicInvest viewed this development positively, as it removed the lingering uncertainty in the company's Sabah operations that could affect its operational efficiency.
It said that with the issue resolved, the group is expected to pay 5% sales tax in Sabah annually going forward.
“Our projection suggests that it is expected to pay an estimated amount of about RM44.8 million per year, by assuming crude oil sales of around 2.1 mbbls from North Sabah and 700 mbbls from the Kinabalu field.
“Subsequently, we lower our financial year ending June 30, 2023 (FY23)-FY25 earnings forecasts by an average of 10.2%.
“Nonetheless, our target price is adjusted higher to RM1.18 (from RM1.05 previously), as we remove the 20% discount that we had ascribed to our sum-of-the-parts valuation given the resolution of the issue.
“We upgrade our rating to 'trading buy', due to attractive upside potential amid lucrative earnings from the consolidation of its Repsol assets, which we believe the market has yet to price in appropriately at this juncture,” it said.