Proposed acquisition of Hibiscus to increase reserves and production

Hong Leong Investment Bank (HLIB) also maintained a ‘Buy’ rating on Hibiscus with its TP price unchanged at MYR3.36.

It said the acquisition was not a surprise as Hibiscus had previously expressed an ambition to increase daily production to 35-50 kilobarrels of oil equivalent (kboe) by 2026, which would not be feasible without M&A.

Following the acquisition, daily Hibiscus production is expected to increase to 29,000. boe after adding approximately 7.9 thousand boe of daily production (84% gas) from Maharajalela Jamalulalam Block B (MLJ field) currently operated by TEPB.

Accordingly, it will raise the composition of the gas it produces to approximately 49 percent (from 36 percent), HLIB said.

However, Maybank Investment Bank (IB) has opted for a ‘Hold’ option on Hibiscus pending the completion of the transaction, with the TP price unchanged at MYR2.31.

“If the acquisition goes through, the TP for Hibiscus will be MYR1.99 as it would create a new debt of MYR1.2 billion to finance the acquisition and impose a tax rate of 55 percent, among other things,” it said.

At 10:25 a.m., Hibiscus share price rose 8.0 cents to MYR2.51 with 3.94 million shares traded.