KUALA LUMPUR (Oct 5): Hibiscus, which had previously questioned the imposition of state sales tax (SST) on its two units operating in Sabah, has proceeded to pay the tax amounting to RM85.7 million. The SST was imposed on revenues from petroleum products sold by SEA Hibiscus Sdn Bhd under the North Sabah production sharing contract (PSC) and Hibiscus Oil & Gas Malaysia Ltd (previously known as Repsol Oil & Gas Malaysia Ltd) under the 2012 Kinabalu Oil PSC.
Hong Leong Investment Bank Research house has maintained its “buy” call with a slightly lower target price (TP) of RM1.54 (from RM1.63), after Hibiscus said it has proceeded to pay the tax amounting RM85.7 million to Sabah state government on Tuesday (Oct 4).
The research house added that Hibiscus has decided to incur the Sabah SST expense (RM85.7) million and made full provision of its payments to the IRB (RM125.5 million) in their 4QFY22, rather than in 1QF23, giving it a clean slate for the year 2023.
“Therefore, the restated core net profit for 4QFY22 and FY22 would be RM257.3 million and RM382.5 million respectively (from RM217.5 million and RM342.7 million previously)”, said HLIB’s Jeremie Yap.
Yap highlighted that this was at a discount to the initial sum of RM97.3 million, compromising RM66.0 million in SST and RM31.3 million in penalty incurred for late payment.
“We believe that Hibiscus is a compelling case and is conspicuously undervalued, given its strong foothold in the upstream energy space,” he concluded
Meanwhile, PublicInvest Research upgraded its rating on Hibiscus Petroleum Bhd to “trading buy” at 87 sen, with a higher TP of RM1.18 (from RM1.05).
“With this issue being resolved, any lingering uncertainty in its Sabah operations that could have affected its operational efficiency has been removed.
“We project that Hibiscus is expected to pay an estimated amount of ~RM44.8 million per year by assuming crude oil sales of around 2.1 mbbls from North Sabah and 700 mbbls from Kinabalu field,” it said.
In a Bursa Malaysia filing on Tuesday, Hibiscus said the proposed capital reduction of RM800 million will eliminate the accumulated losses amounting to RM690.6 million as of June 30, 2022, thereby allowing the company to further enhance its ability to declare dividends and be better positioned to undertake the proposed share buy-back out of its retained earnings in the future.
At the time of writing, Hibiscus’ shares had risen 10.92% or 9.5 sen to 96 sen, valuing the group at RM1.94 billion.