KUALA LUMPUR (March 7): Hibiscus Petroleum Bhd rose as much as 12 sen or 9.68% to RM1.36 amid active trade on Monday morning as an analyst foresees high oil prices to lift its earnings.

At noon break, the stock settled at RM1.35, still up 11 sen or 8.87%.

The counter, which was the most actively traded stock on the bourse on Monday morning, saw 89.4 million shares traded. This is almost four times its 200-day trading volume average of 24.3 million shares.

Maybank Investment Bank analyst Liaw Thong Jung, who has a "buy" call on Hibiscus Petroleum, said in a note on Monday that he revised up Hibiscus Petroleum's target price to RM1.90 from RM1.70 as higher crude oil price outlook is expected to lift the company’s financial year ending June 30, 2022 (FY22) to FY24 earnings estimates by 9% to 28%.

“Hibiscus Petroleum is the best play for a cyclical, rising energy price market — fundamentally sound, financially resilient and offers compelling growth (three-year net profit compound annual growth rate of 80%) with undemanding valuations,” he said.

He noted his target price (+12% revision), based on US$10/barrel of oil equivalent (boe) (about RM41.78/boe) 2P reserves, is undemanding vis-à-vis its peers that trade at higher multiples (US$12/boe to US$31/boe).

He also sees further upside for the stock should it succeed in securing Repsol’s PSC extension, converting some of its sizeable 2C resources (73.2 million barrels) to 2P reserves and/or monetising some of its development fields (i.e. Marigold, Australia) along the way.

According to him, Hibiscus Petroleum, a pure upstream oil and gas (O&G) operator, with a relatively low lifting cost (profit and loss break-even oil price of sub-US$40/boe), is the most leveraged O&G play to capitalise on the strong energy push.

“Oil price has surpassed US$100 per barrel and should sustain over an extended period, for the energy market is facing a trilemma: (i) stronger demand growth post-pandemic, (ii) supply disruption (structural under-capacity) and (iii) rising geo-political risk (Russia-Ukraine crisis),” he said.

He raised his crude oil price outlook by US$10/boe to US$90/US$85/US$85/boe in FY22/FY23/FY24 but lowered Repsol’s FY22 output by 2,000 boe, which raises Hibiscus Petroleum operating expenditure/boe by US$3.

“The Repsol acquisition (completed on Jan 24, 2022) is timely, to ride on the higher oil price outlook. All in, we expect Hibiscus to see strong earnings growth in FY22 (3.1 times year on year) and FY23 (1.9 times year on year) respectively,” he said.