HAP SENG Plantations Holdings Bhd (HSP) may be in the market for an acquisition as it sits on sizeable cash surplus if it wants to see a boost in its fresh fruit bunches (FFB).
“Acquisition cannot be dismissed given the group’s sizeable cash surplus but asking prices are still quite high. An additional consideration for any acquisition is also whether the target estate and/or mill is certified or certifiable as [HSP] is an established supplier of RSPO certified palm oil,” according to a note from Kenanga Research released today.
HSP has an ‘Outperform’ call from Kenanga Research with a target price of RM2.50. The stock closed at RM1.94 yesterday, just 8 sen above its 52-week-low of RM1.86, while its 52-week-high was at RM3.35.
It noted that HSP ended the financial year 2022 on marginally weaker FFB production but stronger CPO price.
CPO prices should soften in FY23 but stay firm while FFB output is also expected to inch up. Maintain FY22-23F core EPS and we continue to like the group’s cash generative upstream operations, net cash position and attractive yields, it added.
Kenanga Research is FFB production of 630,000 MT come FY23 on improving yields.
Without any new land bank or acquisition, it said FY23 harvest will largely be determined by the yield cycle of the trees, weather and labour as 88% or 35,000 ha out of the group’s 40,000 ha is already planted, with the remaining area occupied largely by infrastructure.
For the first nine months ended Dec 31, 2022, HSP posted a net profit of RM195.45 million on RM671 million in turnover. – TMR / pic TMR File