PETALING JAYA: Hibiscus Petroleum Bhd has won praise for its “disciplined” growth plan with analysts making either a “buy” call or maintaining a “neutral” call on the counter.
AmInvestment Bank Bhd (AmInvest) is more upbeat, giving Hibiscus the thumbs up, while a little more cautious PublicInvest Research has chosen to refrain from an overly optimistic recommendation.
AmInvest said Hibiscus remains on track to achieve its targeted sales forecast of 7.2 million to 7.5 million barrels of oil, condensate and gas per year.
Achieving this target will mean a 57% to 63% increase in sales year-on-year, banking on production enhancement strategies.
AmInvest has also forecast a core net profit of RM567.6 million for Hibiscus’ current financial year (FY23) on a revenue of RM2.4 billion. The company recorded a net profit of RM613 million on a RM1.69 billion revenue for the previous financial year.
It calls a “buy” on the counter, giving it a fair value of RM1.40. The stock was trading at 96 sen at mid-afternoon yesterday.
PublicInvest Research said its confidence in Hibiscus is based on the group’s strong acquisition track record and healthy balance sheet.
The research house has maintained its “neutral” call on the counter, with a target price of RM1.18.
“We see elevated global recession risks currently weighing on sentiment in the near term,” it said in a research note on Tuesday. The Brent crude price is now trading at US$73 a barrel, a 15-month low.
It said Hibiscus has several factors in its favour.
It said strong ties with major players such as Shell, Exxon and Repsol would enable the group to retain its advantageous position in sourcing future deals given that any asset disposal by these players would be less price sensitive.
The research firm noted that Hibiscus’s balance sheet is strong at RM532 million, which has grown more than 18-fold since 2016.
Additionally, the group had US$149 million (RM665.14 million) in debt facilities that could be used for capital expenditure.
Plans and challenges
Hibiscus has announced plans to almost double its production level to 35,000 barrels of oil equivalent (boe) per day by 2026 from 19,000 currently.
This will be just over 50% above its targeted level of 23,000 boe set for 2023.
The company has three producing fields, namely the Anasuria cluster in the UK, the North Sabah field and the Peninsula Hibiscus field off the east coast of Peninsular Malaysia.
However, challenges remain. The ongoing legal dispute between its wholly owned subsidiary Hibiscus Oil and Gas Malaysia and Sarawak-based Oceancare Corporation Sdn Bhd (OCSB) weighs heavily on the counter.
On March 3, Hibiscus announced it had received a notice of arbitration from OCSB in relation to a completed contract for the provision of integrated well services for intervention, workover and abandonment works to Hibiscus Oil and Gas.
“OCSB is claiming a total principal amount of RM36,574,760.90 alleging, among other things, variation to original scope of work, which Hibiscus Oil and Gas denies,” it said in a filing to Bursa Malaysia.
The principal amount of RM36.6 million is roughly 2% of Hibiscus’ market capitalisation.
AmInvest said that in the worst-case scenario of OCSB winning the lawsuit, the principle claim could erode the group’s FY23 forecast earnings by a significant 6.4%.
Hibiscus posted a RM70.47 million net profit for the second quarter ended Dec 31, 2022 (2Q23), a 47.9% drop from the preceding quarter at RM135.26 million.
In the same quarter of the preceding year, the net profit was RM48.49 million.
For the six months ended Dec 31, 2022 (1H23), the net profit surged 128.56% to RM205.73 million from RM90.01 million previously.