KUALA LUMPUR (Nov 26): Conglomerate Hap Seng Consolidated Bhd registered a 37.7% increase in net profit for the third quarter ended Sept 30, 2014 (3QFY14) to RM194.42 million or 9.42 sen per share from RM141.24 million or 7.02 sen per share a year ago, on strong performance from its property, credit financing, fertiliser trading and automotive divisions.
 
Revenue for the quarter, however, slid a marginal 0.07% to RM828.93 million from RM829.47 million, said the group in a filing with Bursa Malaysia today. It also declared a single-tier dividend of 15 sen per share.
 
For the cumulative nine months to Sept 30, 2014 (9MFY14), Hap Seng registered a 26.8% increase in net profit to RM565.04 million or 27.92 sen per share from RM445.57 million or 21.54 sen per share a year ago, while revenue improved 13.5% to RM2.78 billion from RM2.45 billion previously.
 
On a segmental basis, Hap Seng's fertiliser trading division contributed 25% to the group's revenue in 3QFY14, followed by automotive (22%), plantation (15%), property (13%), quarry and building materials (11%), trading (11%) and credit financing (4%).
 
On outlook, Hap Seng said its plantation division will continue to be sensitive to the commodities price movements and the supply and demand in the global vegetable oils market.
 
"The implementation of higher biodiesel mandate to B7 from B5 in Peninsular Malaysia on Nov 1, 2014, and in Sabah, Sarawak and Labuan by December 2014 as announced by the government on Oct 28, 2014, along with the zero duty on crude palm oil (CPO) exports from September 2014 to December 2014 are positive measures to reduce the current high palm oil stocks," it said.
 
Hap Seng added that the country's palm oil stocks are expected to ease further as palm oil production is expected to be lower in the fourth quarter due to the wet weather conditions.
 
It said CPO price for the rest of the year is expected to remain range bound at current level on the back of a higher global supply of soybean projected by the US Department of Agriculture.
 
"This is expected to lower soybean oil prices and potentially narrow the premium gap between soybean oil and CPO which may encourage a switch from CPO to soybean oil, hence limiting the uptrend of CPO prices," the group said.
 
As for its fertiliser trading division, Hap Seng anticipates the trading environment to improve with the global potash prices expected to stabilise.
 
"Our operations in Indonesia are expected to generate positive returns with the measures that have been taken to reduce its trading exposure to the volatile Indonesian Rupiah," the group said.
 
On outlook for its automotive division, Hap Seng expects the competitive environment in the Malaysian premium passenger vehicles segment to prevail.
 
"The overwhelming demand for new models launched by Mercedes Benz Malaysia in the second and third quarter of 2014, namely the new A-class, S-class, CLA-class and C-class models, will contribute positively to the division's performance," it said.
 
As for its property division, Hap Seng said contribution from existing investment properties is expected to be maintained with close to optimum occupancy rates and consistent average rental rates.
 
"Menara Hap Seng 2 has obtained its Certificate of Completion and Compliance at end of October 2014 and is expected to contribute positively to the division's future performance," the group noted.
 
On its credit financing division, Hap Seng expects the Small Medium Enterprise sector to continue to be robust.
 
"The division will continue to grow its loan base in the core business segments of its lending activities, focusing on businesses with quality collaterals whilst managing its cost of funds and funding requirements," the group added.
 
As for the quarry and building materials division, Hap Seng said it will continue to focus on improving operational efficiencies of its quarries and brick factories to reduce production costs.
 
The group added that the trading division will continue to expand its market, identifying new products to grow sales and profitability, while closely monitoring its stocks and debtors turnover.
 
"The group is optimistic of achieving satisfactory results for the financial year ending Dec 31, 2014," it concluded.

Hap Seng closed 5 sen higher at RM4.90 today, giving it a market capitalisation of RM10.54 billion.