Fertiliser and plantation operations will be affected, says brokerage
HAP SENG Consolidated Bhd is expected to see its margins for fertiliser and plantation operations contracting in the second half of the current financial year ending Dec 31 (FY08), said Aseambankers.
FY08 is only 11 months as the company changed the financial year-end to Dec 31 from Jan 31 previously.
“Hap Seng’s fertiliser trading margins will soften 5% to 7% in 2009 to 2010 from an unusually 20% high for year ended Jan 31, 2008.
“This will take place on higher stock holding costs as new feedstock is purchased at higher prices,” the research house said in a report.
Trend-wise, fertiliser prices are likely to remain stable into 2009 as global supplies remain tight.
Potash prices, at break-bulk quantities, had hit the psychological US$1,000 per tonne level, it added.
Plantation earnings, on the other hand, will weaken in 2009 due to higher costs of fertiliser, wages and transportation.
Aseambankers expects Hap Seng to achieve an average CPO price of RM2,500 per tonne and fresh fruit bunches to produce 800,000 tonnes in 2009.
This is despite “tree stress”, which is poised to emerge from the second half of this year and might soften production yield.
Hap Seng shares dropped about 32% from its 52-week high of RM3.36 (Nov 29, 2007). The stock closed 11 sen higher at RM2.27 on Friday.
Based on Aseambankers’ estimated dividend of 10.5 sen for FY08, this translates into a yield of 4.6%.
Hap Seng optimistic
By YEOW POOI LING
HAP SENG Consolidated Bhd expects earnings to be sustainable on the back of its existing businesses despite uncertainty in the global economic outlook.
Group managing director Edward Lee Ming Foo told StarBiz that the company’s areas of growth were not in the “slowing” industries. Hap Seng is a diversified group with exposure in plantations, property investment and development, credit financing, trading of fertilisers and motor vehicle, building materials and quarrying.
“We’re not pessimistic over the future, as most of our businesses are not affected by external factors,” he said.
For example, Hap Seng was involved in the upstream building materials, where core materials were needed every year regardless whether there was a boom or bust, he said.
Its quarry expansion in the east coast will help to seize opportunities from the East Coast Economic Corridor.
“There are also not many players in these areas, which will give us an opportunity to grow,” Lee said.
The group’s property development is mainly focused on east Malaysia, which does not follow the same trend as in Peninsular Malaysia.
“We’re building townships in Tawau and Lahad Datu, which are agriculture hubs of Sabah. The total gross development value is about RM160mil to RM170mil.
The Lahad Datu projects were launched in November last year and July this year with respective take up rates of 90% and 50%.
Tawau, on the other hand, was launched in September last year and the take up is 50%.
Lee said the housing demand in east Malaysia was based on actual demand instead of speculation, which was prevailed key cities in Peninsular Malaysia.
“Therefore, you don’t see a big price jump during the boom or a slowdown when the economy weakens,” he said, adding that thanks to good commodity prices, demand remained buoyant in east Malaysia.
Hap Seng’s newly refurbished Menara Hap Seng in the Golden Triangle has led to an increase in rental yields and generated positive returns for the group. Lee said Menara Hap Seng was almost fully tenanted.
With the success, it intends to look for other commercial buildings in the same area to replicate the model.
“However, we’re not in a hurry to buy anything as there is still uncertainty in terms of pricing of commercial properties in Kuala Lumpur,” he said.
Its motor vehicle division sells luxury cars, where demand was less affected by the hike in fuel prices.
These businesses were expected to cushion Hap Seng from the commodity downcycles, Lee said.
“We didn’t want to depend on commodity prices to sustain our business as externality is not within our control, so we build up other businesses,” he added.
The group’s fertiliser business has been the catalyst of growth in the last few quarters.
“Our fertiliser expansion in Indonesia has been successful. After three years, we are now the top two players in the country. There is potential to grow in Indonesia as it has more land for agriculture compared with Malaysia,” Lee said.
He added that demand for fertilisers would grow in line with the expansion in acreage for plantations.
Lee also said the rising demand for fertilisers was led by structural changes within the agriculture industry worldwide.
First, agriculture cultivation is no longer solely for food but also as a source of energy.
The US and Brazil are planting more corn and sugar cane respectively, which are feedstock for ethanol. The demand for grain is also compounded by higher demand for meat.
Second, rapid urbanisation around the world has driven agriculture activities further away from fertile land. As such, more fertilisers are used to achieve the same yield as before.
Finally, the demand for fertilisers is also driven by rapid population growth globally, which is at a much faster rate than 20 years ago.
“Of course, in the short-term fertiliser prices, like all commodities, will go up or come down but in the mid to long-term, the trend is expected to move upwards,” Lee said.
Nonetheless, the cost of production has also increased, so margins would be subject to market forces of supply and demand, he added.
The group’s plantation arm Hap Seng Plantations Bhd (HSPlant) has also generated good earnings, thanks to high prices for crude palm oil (CPO).
Its plantation landbank is in Sabah.
Lee said there were still opportunities to increase acreage in Sabah, especially in the northern part where less plantation companies were vying for.
“The yield level in northern Sabah is less than in other parts of the state but is still better than Sarawak,” he said.
The group does not intend to expand plantation operations to Indonesia due to land ownership issue.
“In Indonesia, we won’t be able to own landbank and we do not want to make huge investments when we do not have the ownership. Besides, we have better control by staying in Sabah,” he added.
Hap Seng is unperturbed by the current correction in CPO prices.
“CPO price is linked to fossil. We don’t expect crude oil prices to fall significantly, as India and China will continue their respective industrialisation activities,” Lee said.
“While prices will move up or down, we will continue with our efforts to be an efficient and low-cost producer. This will help us improve yields, reduce costs and maintain profitability through good and bad times,” he added.
Lee noted that topline growth in the past five years had been expanding consistently at 18% to 20%.
Bottomline expansion, on the other hand, is expected to pick up as past investments start to turn profitable.
“We have to invest first before we can reap the profits. That’s the nature of the business. We should finish the current financial year positively,” he said.
Next year, the group’s capital expenditure would be mainly for the replacement of old equipment and machineries to yield higher energy efficiency.
“We plan to replace old generators at our plantations for better energy usage,” Lee said.
On the present uncertainty in the global economy, Lee said Malaysia was unlikely to be as badly affected as other countries that were more dependent on exports to the US and Europe.
“Malaysia’s trading partners have shifted in recent years to South-East Asia and China, which help us to sort of decouple from the US.
“We’re also fortunate that we have natural resources like CPO and crude oil, which will help us to remain resilient,” he added.
馬幣弱推高肥料成本‧合成銷售賺幅看跌27%
大馬財經 2008-09-12 19:25
（吉隆坡）馬幣兌美元走貶推高進口肥料成本，合成（HAPSENG,3034,主板貿服組）為主要肥料銷售商，料受囤收成本和最新進口成本漲升拖累，2009和2010年銷售業務賺幅將萎縮5到7%。
此外，肥料成本漲升為繼原棕油行情回緩後，種植業另一隱憂，合成的種植臂膀種植（HSPLANT,5138,主板種植組），通過母公司採購和提供肥料，但原棕油行情跌破3000令吉水平，進而影響母公司獲利和估值。
亞歐美研究指出，2009年的肥料行情波動不大，但全球供應緊缺，而肥料之一的碳酸鉀價格，已衝上每公噸1000美元關鍵關口。
儘管售價提高，但囤收肥料成本令合成肥料銷售業務的賺幅將在2009和2010年萎縮至5到7%，無法恢復2008年的20%亮麗賺幅，進而衝擊2009年的肥料交易收入按年下跌69%。
營運盈利料減至4.6億
亞歐美研究預測，合成截至2009年12月31日止財政年營運盈利，從2008年的7億3900萬，減少至4億6310萬令吉。
合成截至今年6月30日的淨負債額為19億令吉，轉換為負債率達0.87倍，但未至令人關注的地步，其中12億為信貸融資業務擁有，實際負債率僅0.3倍。
肥料銷售和汽車銷售，是合成貿易臂膀的業務，也是集團最大的收入貢獻來源，2008財政年（2月至12月的修改期限）的銷售額預測為21億8400萬令吉。
另一方面，合成的50.8%子公司合成種植，2009年盈利無法避免受衝擊，亞歐美估計，肥料、運輸和燃料成本走高，或衝擊合成種植2009年盈利按年下跌5%。
合成種植大部份原料通過母公司，以招標方式而非現價採購，一年施肥兩次，至少6個月前預先採購肥料。肥料成本佔合成種植生產成本的34%。
目標價下調
預計合成種植2009年原棕油價格和鮮棕果串產量穩定，維持每公噸2500令吉和80萬噸，然而，部份油棕樹或今年下半年或減產而影響整體產量。
基於種植業為第二重要收入來源，合成種植盈利下滑將削弱估值，亞歐美因此下調合成目標價，從早前3令吉85仙至3令吉零4仙，但根據健康的負債率而維持“買進”建議。
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