Shares of Hap Seng Plantations Holdings experienced a drop early on Thursday as analysts adjusted their profit forecasts in response to the company’s significant decline in net profit for the second quarter.
The Malaysian plantation firm’s shares fell by 3.1% and were trading at 1.89 ringgit, having previously dropped by as much as 5.1%.
Hap Seng Plantations reported on Wednesday that its net profit for the second quarter stood at MYR9.42 million ($2 million), marking a decrease from MYR66.9 million during the same period last year. This decline was attributed to lower average selling prices of palm products, increased production costs, and losses stemming from fair value adjustments of biological assets.
The company’s quarterly revenue also suffered a 32% drop, reaching MYR168.8 million compared to the previous year.
Kenanga Investment Bank adjusted its rating for Hap Seng to market perform from outperform and reduced the target price from MYR2.30 to MYR1.80.
Teh Kian Yeong, an analyst at Kenanga, revised Hap Seng’s net profit estimates for 2023 and 2024 by 24% and 22% respectively, based on expectations of higher fresh fruit bunches output being offset by rising production costs.
Apex Securities predicts that Hap Seng’s earnings for 2023 will remain lackluster due to subdued crude palm-oil prices, although there may be a recovery in fourth-quarter earnings as a result of increased CPO production during the latter half of this year. The firm reduced its earnings forecast for Hap Seng for the years 2023-2025 by 8%-9%, accounting for anticipated higher operating expenses, while maintaining a hold rating and target price of MYR1.80.
Hong Leong Investment Bank also adjusted its core net profit forecasts for Hap Seng, lowering the figures for 2023 to 2025 by 16%, 1.4%, and 1.3% respectively, to reflect lower fresh fruit bunches yield assumptions. The bank maintains a hold rating on the stock.
