KUALA LUMPUR (Oct 5): PublicInvest Research has upgraded its rating on Hibiscus Petroleum Bhd to “Trading Buy” at 87 sen with a higher target price of RM1.18 (from RM1.05) and said Hibiscus, which had previously against the imposition of Sabah sales tax (SST) on its two operating assets in Sabah, reported that it has proceeded to pay the tax amounting to RM85.7 million to Sabah state government.

In a note on Wednesday, the research house said  the Hibiscus management clarifies that this is to create a stable environment for continuing investment and smooth operations in Sabah.

PublicInvest viewed this development positively as it removes the lingering uncertainty in its Sabah operations that could affect its operational efficiency.

It said having this issue resolved, the Group is expected to pay 5% Sabah sales tax annually going forward.

“Our projection suggests that it is expected to pay an estimated amount of about RM44.8 million per year, by assuming crude oil sales of around 2.1 mbbls from North Sabah and 700 mbbls from Kinabalu field.

“Subsequently, we lower our FY23-25 earnings forecasts by an average of 10.2%.

“Our TP is adjusted higher to RM1.18 (from RM1.05 previously) nonetheless, as we remove the 20% discount that we ascribed to our SOTP valuation given the resolution of this issue.

“We upgrade our rating to Trading Buy due to attractive upside potential amid its lucrative earnings from the consolidation of Repsol assets’ earnings, which we believe the market has yet to price in the earnings appropriately at this juncture,” it said.