KUALA LUMPUR: Hong Leong Investment Bank Bhd's (HLIB Research) says Hap Seng Plantations' (HSP) core net profit of RM100.4 million for the first nine months of FY24 (9M24) exceeded expectations.
This figure represents 87.2 per cent to 90 per cent of both the firm's and consensus' full-year estimates, driven primarily by higher-than-expected palm product prices.
For 10M24, HSP recorded a 2.3 per cent growth in fresh fruit bunches (FFB) output, reaching 531,500 tonnes.
As such, HLIB Research has maintained its FY24 FFB output growth assumption of 3.5 per cent, supported by more areas entering the maturity bracket.
"We have revised our FY24-FY25 core net profit forecasts upward by 11.8 per cent and 10.8 per cent, respectively, primarily due to higher crude palm oil (CPO) price assumptions, reflecting the recent sector-wide upward revision, and adjustments to the windfall profit levy," it said in a note.
Following this earnings revision, the firm has maintained its "Buy" rating on HSP, with a higher target price (TP) of RM2.44.
Meanwhile, CGS International Research expects HSP's 4Q24 earnings to be the highest for FY24 on the back of higher sales volume and CPO average selling price (ASP).
Based on this assumption, the firm said its cumulative 9M24 performance was ahead of expectations.
"The CPO price has spiked by 21 per cent from Oct 24 to date. Note that Hap Seng Plantations' CPO ASP tends to be higher than its peers, given its sustainability-related and food-grade certifications.
"Its 3Q24 CPO ASP was RM4,098 per tonne, higher than the Malaysia Palm Oil Board (MPOB) Sabah's CPO spot price of RM3,981 per tonne," it said.
CGS International has maintained its "Add" call with a target price (TP) of RM2.25, citing HSP's higher-than-peer ASP, cost efficiency, and attractive valuations as key reasons for its positive outlook.
Moreover, based on its dividend payout assumption of 60 per cent, the firm expects a higher dividend of 8.4 sen per share in the second half of 2024 (2H24).
This would translate into a dividend yield of five to six per cent for the 2024 forecast.
"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," it said.