Hap Seng's 4Q profit up 32% to RM188.4 mil on improved contributions from most divisions

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KUALA LUMPUR (Feb 26): Hap Seng Consolidated Bhd’s net profit for the fourth quarter ended Dec 31, 2014 (4QFY14) came in 32.1% higher at RM188.43 million or 8.78 sen a share, despite revenue dipping 4.84% to RM983.27 million.

The better earnings were achieved on the back of improved contribution from all divisions, except for plantation and property divisions — the two largest divisions of Hap Seng that saw their respective operating profits dipped 14.3% to RM50.61 million and 34% to RM117.1 million respectively.

“Plantation division’s [4QFY14] revenue of RM126.7 million was 11% lower than the preceding year['s] corresponding quarter, mainly affected by lower average selling price of crude palm oil (CPO) and palm kernel (PK).”

The group’s average selling price of CPO and PK for 4QFY14 was RM2,159 and RM1,381 per tonne respectively, as compared with 4QFY13’s RM2,469 per tonne for CPO and RM1,542 per tonne for PK.

On the property division, Hap Seng said in spite of better contribution from projects and higher rental income from investment properties, the division’s quarterly revenue and operating profit of RM256.2 million and RM117.1 million was lower by 10% and 34% respectively, due to the sale of development land included in the preceding year's corresponding quarter.

Nevertheless, other divisions such as credit financing, fertiliser trading, quarry and building materials, automotive and trading, reported stronger earnings.

As for its full year ended Dec 31 last year, Hap Seng (fundamental score: 1.5; valuation score; 2.4) raked in a net profit of RM753.47 million or 36.67 sen a share, up 28.08% from RM588.26 million in the previous year. Revenue came in 8.07% higher at RM3.77 billion, from RM3.49 billion.

Moving forward, Hap Seng said the world palm oil production is expected to be lower than expected in the first quarter of 2015, due to the drought in Indonesia and floods in Malaysia.

“Whilst the lower production may support palm oil prices in the short term, concerns of global economic uncertainties, foreign currency fluctuations and weak crude oil and commodities prices, are likely to weigh down on the movements in palm oil prices, which are expected to be volatile in 2015.”

On the property division, the group said its Menara Hap Seng and Menara Citibank are expected to maintain their “close-to optimum occupancy rates and consistent average rental rates”, whilst Menara Hap Seng 2, which obtained its Certificate of Completion and Compliance at end of October 2014, is expected to increase its occupancy rate progressively and contribute positively to the division’s future performance.

“The group is optimistic of achieving satisfactory results for the current financial year ending Dec 31, 2015," said Hap Seng.

Hap Seng closed 2 sen or 0.54% higher at RM3.70 today, translating into a market capitalisation of RM7.93 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)