KUALA LUMPUR (March 7): Hibiscus Petroleum Bhd rose 12 sen or 9.68% to RM1.36 amid active trading on Monday morning as an analyst forecast high oil prices will boost its earnings.
At the midday break, the stock stood at RM1.35, still up 11 sen or 8.87%.
The counter, which was the most actively traded stock on the exchange on Monday morning, saw 89.4 million shares traded. That’s almost four times its 200-day trading volume average of 24.3 million shares.
Maybank Investment Bank analyst Liaw Thong Jung, who has a “buy” call on Hibiscus Petroleum, said in a note on Monday that he had revised Hibiscus Petroleum’s price target higher to 1.90. RM against RM 1.70 as crude oil price outlook is expected to rise. bring the company’s fiscal year ending June 30, 2022 (FY22) to FY24 earnings estimates of 9% to 28%.
“Hibiscus Petroleum is the best choice for a cyclical and rising energy price market – fundamentally sound, financially resilient and offers compelling growth (three-year CAGR of 80%) with valuations undemanding,” he said.
He noted that his price target (+12% revision), based on 2P reserves of 10 USD/barrel of oil equivalent (boe) (around RM41.78/boe), is undemanding vis-à-vis against its peers which trade at higher multiples (USD 12/boe to USD 31/boe).
He also sees another upside to the stock if he succeeds in securing Repsol’s PSC expansion, converting some of his large 2C resources (73.2 million barrels) to 2P reserves and/or monetizing some of his fields. development (i.e. Marigold, Australia) along the way. .
According to him, Hibiscus Petroleum, a pure upstream oil and gas (O&G) operator, with a relatively low lift cost (oil price at profit and loss equilibrium below 40 USD/boe), is the O&G game the more leveraged to capitalize on the strong energy surge.
“The price of oil has risen above USD 100 per barrel and is expected to hold for an extended period as the energy market faces a trilemma: (i) stronger demand growth post-pandemic, (ii ) a supply disruption (structural undercapacity) and (iii) ) increasing geopolitical risk (Russian-Ukrainian crisis),” he said.
It raised its crude oil price outlook by $10/boe to $90/$85/$85/boe in FY22/23/24, but cut Repsol’s production for FY22 of 2,000 boe, which increases Hibiscus Petroleum’s operating expenses/boe by $3.
“The acquisition of Repsol (completed on January 24, 2022) is timely, to take advantage of the outlook for higher oil prices. Overall, we expect Hibiscus to experience strong earnings growth over the next FY22 (3.1 times yoy) and FY23 (1.9 times yoy) respectively,” he said.