Analysts cut Hibiscus earnings forecasts after quarterly results miss expectations

Analysts cut Hibiscus earnings forecasts after quarterly results miss expectations
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KUALA LUMPUR (Feb 23): Analysts have cut Hibiscus Petroleum Bhd's earnings forecasts after its second quarter (2Q) net profit missed expectations.

Public Invest Research’s Nurzulaikha Azali said in a note today, Hibiscus Petroleum's 2Q results make up only 26.4% of her full-year expectations and 55% of consensus.

“While we adjust our top line forecasts higher in anticipation of more oil to be delivered, we cut FY21/FY22/FY23 earnings estimates by 38%/32%/26% as we impute lower operating margins, consistent with relative weakness seen in 2QFY21,” she said.

However, backed by higher oil prices, she said, the group’s FY22 to FY23 earnings remain on track for year-on-year growth of 44.5% and 13.6% respectively.

She maintained a "neutral" call on the stock but adjusted its target price to 76 sen from 65 sen previously.

“The target price was based on a rolled-over free cash flow valuation to FY22 and removal of the 10% discount in our sum-of-parts calculation given the positive global sentiment,” she said.

AmInvestment Bank Research’s analyst Alex Goh also said in a note today, he has reduced Hibiscus Petroleum's FY21 to FY22 forecast earnings by 7% due to higher non-cash amortization and decommissioning assumptions for the group’s 50%-owned Anasuria concession.

“Hibiscus’ 1HFY21 core net profit of RM25 million (-67% year-on-year) was below expectations, accounting for 38% of our earlier FY21 forecast earnings and 41% of consensus, versus 46%-47% over the past two years,

“This was mainly due to a RM16 million increase in amortisation charge for intangibles and RM4 million provision increment for decommissioning costs in 2QFY21 for the Anasuria cluster, which we understand will be mostly recurring going forward,” he said.

Goh, however, maintained his "buy" recommendation on Hibiscus Petroleum with a sum-of-parts-based fair value of 79 sen per share, which implies an enterprise value/proven and probable reserves (2P) valuation of US$6.10/barrel.

Goh pointed out that Hibiscus Petroleum is “currently only trading at US$5.85/barrel — at a discount of 35% to its closest peer, UK-listed EnQuest and half of regional average”. 

“This is compelling given the more optimistic crude oil price environment. Additionally, Hibiscus is listed in the FTSE4Good Bursa Malaysia Index with the highest 4-star environmental, social and governance (ESG) rating, which ranks amongst the top 25% in the FBM Emas Index,” he added. 

At 10.07am, Hibiscus Petroleum shares rose 3.5 sen or 4.35% to 72 sen, valuing the group at RM1.23 billion.

Joyce Goh