Hibiscus’s proposed acquisition to boost reserves, production

2007
KUALA LUMPUR (Bernama) – Hibiscus Petroleum Bhd’s (Hibiscus) proposed acquisition of the entire equity interest in TotalEnergies EP (Brunei) BV (TEPB) for USD259.4 million (MYR1.22 billion) is positive as it will boost the former’s gas reserves by more than double, increase overall production by 37 per cent and lift its earnings by 12-16 per cent on average, said a research firm.
 
Public Investment Bank (PIVB) deemed the price tag as fair given that the current Brent oil price market dynamics trading in the range of USD75-95 per barrel throughout the remaining concession until 2039.
 
“We maintain our ‘Outperform’ call with an unchanged target price (TP) of MYR3.20 for now, although our discounted cash flow valuation could see an additional 12 cent or 3.8 per cent potential upside from this acquisition,” it said in a research note.
 
This latest acquisition by Hibiscus would be funded via internal funds and/or new debt.

Hong Leong Investment Bank (HLIB) has also maintained its “Buy” recommendation on Hibiscus with an unchanged TP of MYR3.36.

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It said the acquisition is not a surprise as Hibiscus had earlier expressed its ambition of growing daily production to 35-50 kilo barrels of oil equivalent (kboe) by 2026, which would not be plausible without undertaking merger and acquisition exercises.

Post-acquisition, Hibiscus’ daily production is expected to grow to 29kboe after adding about 7.9kboe of daily production (84 per cent gas) from the Block B Maharajalela Jamalulalam (MLJ Field) currently operated by TEPB.

Correspondingly, it will elevate the gas composition of its production to about 49 per cent (from 36 per cent), HLIB said. 

However, Maybank Investment Bank (IB) has made a “Hold” call on Hibiscus pending the deal completion, with an unchanged TP of MYR2.31. 

“If the acquisition goes through, the TP for Hibiscus would be MYR1.99 as it would create new debt of MYR1.2 billion to fund the acquisition and a tax rate of 55 per cent, among others,” it said.

As at 10.25 am, Hibiscus’ share price rose 8.0 cent to MYR2.51 with 3.94 million shares traded. 

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