BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Tuesday, 29 May, 2012

Result Review

Hap Seng Plantations

Below
Stock Data
Bloomberg Ticker HAPL MK Market Cap (RM'mn) 2,328 Issued shares (mn) 800 52-week high 3.23 52-week low 2.29 3-mth avg daily volume ('00) 7,770 Free Float 17.92 Shariah Compliant Y Altman Z-score 6.79 YTD price chg 5.43 YTD KLCI chg 1.58 Beta 0.81 Major Shareholders Haps Seng Cons. 55.16% Innoprise Corp S/B 15.00% EPF 6.22% 1mth (2.68) (1.87) 2011 739.0 654.9 337.1 339.5 253.0 31.62 20.00 6.87 2.35 9.20 51.47% 51.84% 25.48% 13.90% 12.24% N. Cash 9.14% 38.23% 48.27% 49.96% 49.59% 2012E 658.5 611.5 289.7 292.6 219.4 27.43 18.00 6.19 2.44 10.61 47.38% 47.84% 25.00% 11.45% 11.80% N. Cash -10.89% -6.62% -14.04% -13.81% -13.26% 3mth (4.28) (3.37) 2013E 703.0 681.4 311.9 315.5 236.6 29.58 20.00 6.87 2.54 9.84 45.78% 46.30% 25.00% 11.88% 14.41% N. Cash 6.76% 11.43% 7.66% 7.84% 7.84% 12mth 22.58 11.05 2014E 774.4 714.9 322.8 326.9 245.2 30.65 21.00 7.22 2.63 9.49 45.15% 45.73% 25.00% 11.85% 14.25% N. Cash 10.14% 4.91% 3.47% 3.61% 3.61%

Buy
Price: RM2.91 Target: (+30.6%)RM3.80 Price: Hap Seng Plantations performance was affected by
lower FFB production and commodities prices, higher replanting expenditure and production costs. YoY revenue dropped 13.9% to RM124.0m, whereas net profit sank 25.1% to RM43.3m. We have revised down our revenue and earnings forecasts by 7.6% and 1.0% for FY12 and FY13 respectively but maintain our pre-tax margin estimate. Tweaked our target price lower slightly to RM3.80 from RM3.85. Maintain buy. Revenue declined. Hap Seng Plantations revenue declined 13.9% to RM124.0m due to lower FFB production and lower average commodities selling prices. The FFB production for the quarter dropped 9.6% to 149.6k tonnes from 165.4k tonnes previously, whilst the average selling price for CPO and Palm Kernel was RM3,133/mt (-11.5%) and RM1,908/mt (-34.4%) vs. RM3,542/mt and RM2,907/mt previously. Higher cost. Besides the lower sales, Groups performance was also affected by higher production costs higher fertilizer prices and higher labour rates. Increasing replanting expenditure in tandem with larger replanting area (3,518 ha vs. 2,594 ha) has also affected the Groups results. Consequently, net profit plunged 25.1% to RM43.3m. Forecast. Sales were below expectation, hence, we have revised downward our revenue and earnings forecast by 7.6% and 1.0% for FY12 and FY13 respectively. Despite lower revenue, Hap Seng Plantations managed to maintain its pre-tax margins at above the 5 years average of 43.7%. Given this, we maintain the pre-tax margin estimates at approximately 47.8% and 46.3% for FY12 and FY13 respectively. View and Valuation. In view of lower forecast, we have also revised downward our target price slightly from RM3.85 to RM3.80 which was derived based on a 3-year average P/E ratio of 13x and next 12 months EPS of 29.30 sen. Based on the closing price of RM2.91, this represent an upside potential of more than 30.0%. Maintain BUY.

Low production quarter

Share Performance (%)

Absolute vs. KLCI

Financial Highlights
FYE 31 Dec FFB Prod. ('000 mt) Turnover EBIT Pretax profit Net Profit EPS (sen) Gross DPS (sen) Div Yield (%) NTA/share (RM) PE Ratio EBIT Margin Pretax Margin Effective tax rate ROE ROA Net Gearing (x) 2010 677.1 473.8 227.3 226.4 169.1 21.14 13.00 4.47 2.20 13.77 47.98% 47.78% 25.30% 9.83% 8.44% N. Cash 0.64% 26.97% 65.60% 67.52% 68.95%

Growth Ratios
FFB Turnover EBIT Pretax profit Net profit

Share Price Chart

3.3 3.1 2.9 2.7 2.5 2.3 2.1

Jun-11

Jul-11

May-11

Ng Keat Yung nkyung@bimbsec.com.my 03-26918887 ext 181

Mar-12

Dec-11

Nov-11

Sep-11

Aug-11

Feb-12

Apr-12

Oct-11

Jan-12

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29 May 2012

Result Review: Hap Seng Plantations 1QFY12

Quarterly figures
FYE 31 Dec (RM'm) Revenue EBIT Pretax profit Taxation Minority interest Net Profit EPS (sen) Net gearing (x) EBIT margin (%) PBT margin (%) Net margin (%) Effective tax rate (%) Mar-11 144.1 77.3 77.1 -19.3 0.0 57.8 7.22 0.00 53.67 53.49 40.09 25.04 Jun-11 182.4 102.5 102.2 -26.3 0.0 75.9 9.49 0.00 56.22 56.05 41.62 25.75 Sep-11 167.4 88.7 88.7 -22.4 0.0 66.2 8.28 0.00 52.97 52.97 39.57 25.30 Dec-11 161.0 70.7 71.5 -18.5 0.0 53.1 6.63 0.00 43.90 44.42 32.96 25.80 Mar-12 QoQ Chg 124.0 -23.0 58.0 -17.9 58.0 -18.8 -14.8 -19.9 0.0 N/A 43.3 -18.5 5.41 -18.4 0.00 N/A 46.80 6.6 46.80 5.4 34.88 5.8 25.47 -1.3 YoY Chg -13.9 -24.9 -24.7 -23.4 N/A -25.1 -25.1 N/A -12.8 -12.5 -13.0 1.7

Source: BIMB Securities

Income Statement
FYE 31 Dec (RM'm) Revenue EBITDA Pretax profit Tax MI Net profit Net profit growth (%) EPS (sen) EPS growth (%) Gross DPS (sen) Dividend yield (%) NTA/share (RM) Net gearing (x) PER (x) P / NTA (x) ROE (%) ROA (%) 2009 373.1 160.7 135.1 (35.0) 0.0 100.1 -23.5 12.5 -23.5 9.0 3.09 2.10 0.03 23.26 1.39 N/A N/A 2010 473.8 252.2 226.4 (57.3) 0.0 169.1 68.9 21.1 69.0 13.0 4.47 2.20 N. Cash 13.77 1.32 9.83 8.44 2011 654.9 363.1 339.5 (86.5) 0.0 253.0 49.6 31.6 49.6 20.0 6.87 2.35 N. Cash 9.20 1.24 13.90 12.24 2012E 611.5 318.9 292.6 (73.1) 0.0 219.4 -13.3 27.4 -13.3 18.0 6.19 2.44 N. Cash 10.61 1.19 11.45 11.80 2013E 681.4 313.9 315.5 (78.9) 0.0 236.6 7.8 29.6 7.8 20.0 6.87 2.54 N. Cash 9.84 1.15 11.88 14.41 2014E 714.9 326.8 326.9 (81.7) 0.0 245.2 3.6 30.6 3.6 21.0 7.22 2.63 N. Cash 9.49 1.10 11.85 14.25

Source: BIMB Securities

Balance Sheet
FYE 31 Dec (RM'm) Current assets Non-current assets Total Assets Current liabilities Non-current liabilities Shareholders' fund Minority interest Equity & liabilities 2009 87.3 1,901.0 1,988.2 66.8 241.4 1,680.0 0.0 1,988.2 2010 110.9 1,908.9 2,019.8 51.1 207.5 1,761.1 0.0 2,019.8 2011 204.8 1,909.9 2,114.7 46.5 190.1 1,878.1 0.0 2,114.7 2012E 247.3 1,927.4 2,174.7 31.0 190.1 1,953.6 0.0 2,174.7 2013E 311.5 1,942.1 2,253.6 33.4 190.1 2,030.2 0.0 2,253.7 2014E 378.5 1,952.9 2,331.3 33.4 190.1 2,107.8 0.0 2,331.4

Source: BIMB Securities

www.bimbsec.com.my

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29 May 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system:

Result Review: Hap Seng Plantations 1QFY12

STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months OUTPERFORM The stock is expected to perform ahead of the market in the next 12 months TRADING BUY The stock is expected to outperform the market in the next 3 months NEUTRAL The stock is expected to perform in line with the market in the next 12 months TRADING SELL The stock is expected to underperform the market in the next 3 months SELL An expected price depreciation of more than 10% in the next 12 months SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB Securities SdnBhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities SdnBhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

www.bimbsec.com.my

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