Stock With Momentum: Hap Seng Plantations Holdings

This article first appeared in The Edge Financial Daily, on December 23, 2019.
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Hap Seng Plantations Holdings Bhd (+ve)

TRADING of shares in Hap Seng Plantations Holdings Bhd (HSP) (fundamental: 2.25/3, valuation: 1.2/3) triggered our momentum algorithm last Friday for the second time this year. The stock closed four sen or 2.04% higher at RM2 last Friday, with 276,600 shares done compared with its 200-day average volume of 51,906 shares.

In a research note dated Dec 20, Hong Leong Investment Bank (HLIB) reiterated its positive view on Hap Seng Plantation’s near-term earnings outlook, on an improving palm oil price sentiment and a mild fresh fruit bunch production growth.

Noting the company’s net profit plunging 98.8% to RM300,000 for the nine months of financial year 2019 (9MFY19) mainly due to lower realised palm product prices, HLIB said it expects a significant earnings improvement from the fourth quarter of FY19, driven by a sharp recovery in crude palm oil (CPO) prices. “Based on our estimates, for every RM100 per tonne change in our CPO price assumption, it will change our net profit forecast for FY20 by RM11.6 million.”