1HFY6/22: Above expectation
Maintain BUY and MYR1.70 TP
1HFY22 core earnings (4.1x YoY) made up 58% of our FY forecast (exRepsol), on a much improved QoQ performance (production & opex at Anasuria & North Sabah ops) in 2QFY22. We have raised FY22-24 net
profit by 28%-36%, largely led by a higher crude oil price outlook (+USD5/ boe). We see upside to our TP, which is pegged to USD10/ boe of EV/ 2P reserves valuation. Extension to Repsol’s PSC beyond 2032, asset monetisation deals on its 2C resources or additional 2P reserves upside would add to upside.
An improved 2QFY22 & 1HFY22
Net profit of MYR49m (+17% QoQ) in 2QFY6/22 took 1HFY6/22 earnings to MYR90m (+311% YoY). The QoQ strength was driven mainly by Anasuria’s much improved (+40%) ops. It reported higher: (i) average uptime (+6- ppts), (ii) daily oil/gas production (+9-10%) and (iii) gas prices (2-4x) while realising lower opex (-13%). Its North Sabah ops too reported similar sequential improvement. Hibiscus realised oil price of USD72/ bbl (Anasuria) and USD75/ bbl (North Sabah) in 2Q22.
Delivering Repsol in 2H would lift earnings
Hibiscus will consolidate Repsol’s earnings from 3QFY22 (completed on 24 Jan 2022). We are positive on this transaction. The deal: (i) is undemanding (USD6.16/ boe @ 2P reserves), (ii) instantly lifts its production/ 2P reserves/ 2C resources by almost 3x/ 2x/ 2x & (iii) offers Hibiscus the prospect to diversify its assets portfolio to 17% gas (vs. 2% gas previously); a crucial aspect, in its ESG and energy transition quest.
Turning more bullish on oil price, estimates raised
Oil is nearing USD100. The demand-supply mismatch in the oil’s market is prevalent, strained by prolonged under-investment since 2014. The adverse situation will extend over the next 2-3 years, resulting in oil price sustained at elevated levels. We raised our FY22-24E: (i) oil price assumption by USD5/boe to USD75-80 (generating strong FCFs during these periods) and (ii) earnings by 36%/ 35%/ 28% This will be partially offset by revisions to its Anasuria & North Sabah ops (production & opex).