This article first appeared in The Edge Financial Daily on February 27, 2020

Hibiscus Petroleum Bhd
(Feb 26, 84.5 sen)
Maintain outperform with an unchanged target price of RM1.55: Hibiscus Petroleum Bhd reported an improved second quarter ended Dec 31, 2019 (2QFY20) results due to better contributions from both of its producing fields, Anasuria UK and North Sabah Malaysia. The improvement was mainly attributed to higher uptime achieved with maintenance works completed, hence lower operating expenditure (opex) per barrel (bbl), higher offtakes and oil sold from the North Sabah fields, and higher average realised oil price during the quarter.

Stripping off all exceptional items amounting to RM34.2 million, Hibiscus’ 2QFY20 core net profit was higher at RM85.4 million (+30.0% year-on-year [y-o-y], +52.6% quarter-on-quarter [q-o-q]), in tandem with higher revenue (+64.6% y-o-y, +70.7% q-o-q) of RM271.8 million. For the first half of FY20 (1HFY20), core net profit was lower by 17% y-o-y however attributed to lesser offtakes in the Anasuria field (two offtakes versus three for 1HFY19).

The results are deemed within our expectations despite making up 60.1% of full-year forecasts as we see the volatility in oil prices bringing full-year numbers more in line. The results are below consensus expectations at 38.2% of full-year estimates however.

Average uptime at the Anasuria field improved to 85% from 77% last quarter as maintenance works were completed, hence lower opex per bbl of US$22.64 against US$26.04. There was one offtake done in the quarter, bringing the total offtakes for 1HFY20 to two as compared with three for 1HFY19. Overall, the field reported revenue of RM75 million (+8.2% q-o-q) despite lower quantities of oil sold [249,704 bbls for 2QFY20 versus from 272,345 bbls for 1QFY20]), thanks to the higher realised oil price of US$68.67 per barrel (1QFY20: US$58.41/bbl). Earnings before interest, taxes, depreciation and amortisation (Ebitda) was flat at RM35.9 million (1QFY20: RM35.1 million).

The North Sabah asset recorded an Ebitda of RM109.9 million (+136% q-o-q) on the back of RM195.9 million (+120.3% q-o-q) revenue. The improvement was due to higher uptime achieved at 93% versus 85% for 1QFY20, lower opex amounting to US$12.23/bbl against US$15.33/bbl which includes amounts incurred for planned maintenance activities performed, two offtakes done during the quarter with 671,452 bbls of oil sold (334,613 bbls on one offtake for 1QFY20), and higher realised price of US$70.19/bbl as compared with US$63.63/bbl last quarter.

We expect there will be at least three offtakes for 2HFY20, hence the performance and contributions of this field remaining stable. — PublicInvest Research, Feb 26