by ASILA JALIL / pic source: hibiscuspetroleum.com

HONG Leong Investment Bank Bhd (HLIB Research) projected Hibiscus Petroleum Bhd’s net profit to triple in the financial year 2022 (FY22) to RM336.2 million supported by higher crude oil prices. 

The upstream oil and gas company’s earnings are expected to rise a further 86% to RM625.6 million in FY23, representing a superior compound annual growth rate of 146%. 

Thus, HLIB Research has a “Buy” recommendation on Hibiscus Petroleum with a target price of RM1.85 per share. Hibiscus Petroleum was trading at RM1.38 on Monday.

“We strongly believe investors have not priced in the exquisite prospects of Hibiscus Petroleum’s profits and cashflows in the upcoming quarters — mainly from additional production volumes from the completed acquisition of Fortuna International Petroleum Corp (FIPC) assets in January 2022 from Repsol and significantly higher crude oil prices.

“Our average realised crude oil price assumptions for the group is relatively conservative at USD$90/bbl for FY22 and FY23,” the HLIB Research report yesterday stated.

At about 4.5 times FY23F price-to-earnings, HLIB Research added Hibiscus Petroleum is a compelling case and is conspicuously undervalued given its strong foothold in the upstream energy space,” it added. 

Total production output for the Anasuria and North Sabah assets in FY22-FY23 are forecast at 7,800 and 8,800 barrels of oil equivalent per day (boepd) respectively. 

The FIPC assets would boost an additional 14,300 and 14,600 boepd for FY22 and FY23 respectively, which would increase Hibiscus Petroleum’s production output by almost three-fold to a total of 22,100 and 23,400 boepd respectively, the report noted. 

“As the acquisition of FIPC was completed only on Jan 25, we would only be able to see this asset’s contribution to the Hibiscus Petroleum group in its upcoming third quarter of FY22 results and beyond,” it said. 

The investment bank expects crude oil prices to stay elevated due to demand from economic reopening and rising concerns on possible oil supply shortage in the wake of geopolitical tensions in Eastern Europe, as well as supply disruptions in the Caspian.