Hap Seng’s 4Q19 earnings jump over 4 times

Net profit came in at RM682m, helped by improved contributions from its plantation, property and building materials divisions


HAP Seng Consolidated Bhd’s earnings for the fourth quarter ended Dec 31, 2019 (4Q19), rose more than fourfold year-on-year (YoY) as the group recorded a RM472 million gain from the disposal of HS Credit (Melbourne) Pte Ltd (HSCMPL).

Net profit came in at RM681.96 million against RM156.25 million posted in 4Q18, also helped by improved contributions from its plantation, property and building materials divisions, it told Bursa Malaysia yesterday.

Last year, the group sold its unit, HSCMPL, to Lei Shing Hong Capital Ltd for US$175.5 million (RM740.61 million) in a related- party transaction that was completed in November 2019.

Revenue for the quarter rose 24.4% YoY to RM1.77 billion from RM1.43 billion the year before, supported by higher revenues from the plantation, property and automotive divisions although revenues from the credit financing, trading and building materials divisions were lower.

Plantation revenue jumped 30% to RM124.9 million in the present quarter, mainly on higher sales volume and better average selling price realisation of crude palm oil (CPO).

CPO sales volume increased 13% YoY to 45,577 tonnes as a result of favourable inventories movement, although palm kernel sales volume fell 12% on lower production.

Production for both CPO and palm kernel dipped 15% and 19% respectively due to lower fresh fruit bunches production by 14% due to seasonal yield trend.

Meanwhile, property revenue jumped 195% YoY to RM576.2 million from higher sales of non-strategic properties and its property development and construction activities.

Revenue from the credit financing division slipped 3% YoY to RM78 million, affected by a lower average loan base due to early redemption and settlement of loans.

Automotive revenue expanded 29% YoY to RM420.9 million, with higher revenue from all segments.

However, the division incurred an operating loss of RM20.3 million versus RM11,000 in the previous year due to lower margins from the passenger car segment, while the commercial vehicle wholesale distribution and retail businesses were affected by start-up and dea- lers’ network development costs.

Revenue from fertilisers trading and general trading business dipped 24% YoY to RM412.3 million, while building materials revenue fell 12% YoY to RM220.2 million, 12%.

For the 12 months ended Dec 31, 2019, Hap Seng’s net profit was up 1.5% YoY at RM1.16 billion, while revenue rose 13.6% YoY to RM7.1 billion.

Going forward, shipments to India and China are expected to be subdued in 1Q20 due to India’s current restriction on refined palm oil and the coronavirus outbreak in China.

“CPO production and palm oil inventories in 1Q20 are expected to remain low, which may support CPO prices in the near term,” the group said.

Amid challenging property market conditions, the company’s property division will continue to drive sales and progress of current development projects, as well as optimise the occupancy rates and rental yield of its investment properties.

The automotive division will continue to grow market share in the passenger car segment through its expanded network of autohauses and pre-owned car centres, while expanding commercial vehicle market coverage through its upgraded dealers’ network with more dedicated 3S (sales, service and spare parts) dealerships.

“The division is focused on continuously improving its productivity and efficiency of its after-sales and services segment to provide service excellence to its customers,” the firm added.

For the trading division, Hap Seng expects fertiliser demand to improve in 2020 after the deferment of fertiliser applications by planters in 2019 due to low CPO prices.

Shares of the company closed 1.96% or 18 sen lower at RM9 yesterday, valuing the company at RM22.41 billion.