Hibiscus Petroleum Berhad is located at Malaysia and headquartered at Kuala Lumpur. This firm focuses primarily on the monetization of oilfield manufacturing in fields such as the United Kingdom and Australia, and on the expanding portfolio of growth and manufacturing assets. The shares of Hibiscus Petroleum are mentioned in the Bursa Malaysia Main Market. The stocks of the Company were categorized by the Shariah Advisory Board of Malaysian Securities Commission as Shariah-compliant securities (Hibiscus,2019). The competitor for Hibiscus Petroleum Berhad is Sapura Energy Berhad.
It is because both companies are involved in the same sector which is the energy sector.
This company has two valuation method which is Asset-Based Valuation and Market to Book Ratio. The reason why these 2 methods can be used for this company, it is because it is easy to be found in the financial statement, annual report for the past 3 years. There is also another method that can be used, however, it doesnt give any accurate figure for this calculation part.
Therefore, asset-based valuation and market to book ratio are the easier methods to be calculated and also easy to find in the annual report. Asset-Based Valuation = Total Assets Current Liabilities Long Term Debt
Petroleum Total Assets Current Liabilities Long Term Debt Assets Based Valuation
RM000 RM000 RM000 RM000
2016 RM 1,269,167,251 RM 150,657,652 RM 390,866,134 RM 727,643,465
2017 RM 1,319,585,742 RM 125,070,096 RM 325,562,376 RM 868,953,270
2018 RM 1,973,964,938 RM 235,748,290 RM 345,172,292 RM 1,393,044,356
Table 1 shows the calculation of Asset Based Valuation of Hibiscus Petroleum for the past 3 years
Market to Book Ratio = Market CapitalizationNet Book ValueHibiscus
Petroleum Market Capitalization Net Book Value Market to Book Ratio
RM000 RM000 2016 RM 273 RM585 0.47
2017 RM 592 RM 742 0.80
2018 RM 190 RM 995 0.19
Table 2 shows the calculation of the Market to Book Ratio of Hibiscus Petroleum for the past 3 years
Figure 1 shows the trend analysis of asset-based valuation for Hibiscus Petroleum Berhad for the past 3 years
Based on figure 1 above, among the past 3 years, 2018 has increased compared to the previous years which is the year of 2016 and 2017. In the year 2016, the balance sheet for Hibiscus Petroleum has resulted very low compared due to the company has just started with engaging Anasuria Hibiscus which is located in the United Kingdom. Therefore, the company has targeted increased by RM997 billion to RM144 due to the Group acquired 50% of the shares of Anasuria Hibiscus, North Sea, United Kingdom. Furthermore, tangible operating cost reductions (HibiscusPetroleumAnnualReport,2016).
As for 2017, there were slightly increase by RM727 to RM868 compared to the year of 2016. This increase was mainly due to a favorable foreign exchange impact from the retranslation of the Groups intangible assets caused by appreciation in both the United States Dollar (USD) and Australian Dollar (AUD) when compared to the Malaysian Ringgit (RM). Furthermore, the current asset has also been increased by RM58.6 million to RM83.6 million due to higher cash and bank balances of RM25.8 million. Furthermore, trade receivables increased from RM2.0 million as at 30 June 2016 to RM7.4 million as at 30 June 2017 attributable to project management fees relating to the Anasuria Cluster being charged by the Group. The Groups total liabilities amounted to RM577.2 million as at 30 June 2017, a decrease of RM107.7 million from RM684.9 million as of 30 June 2016. The base consideration for the acquisition of the Anasuria Cluster was USD52.5 million. As at 30 June 2017, USD15.0 million had been settled, per the agreed deferred consideration payment schedule. As a result, total outstanding deferred consideration as at 30 June 2017 was RM31.4 million. as compared to RM82.4 million that was outstanding on 30 June 2016. The outstanding portion of the deferred consideration was also settled on 8 September 2017, prior to the final settlement date. Other payables and accruals decreased by RM34.0 million from 30 June 2016 to 30 June 2017 due to payment of liabilities incurred through the acquisition of the Anasuria Cluster and drilling of the Sea Lion. In addition, net taxation liabilities reduced by RM27.3 million. This was due to the reversal of deferred tax liabilities relating to the Anasuria Cluster. (HibiscusPetroleumAnnualReport,2017)
In the year of 2018, total non-current assets were amounted to RM1,571.5 million as at 30 June 2018 compared to RM1,236.0 million as at 30 June 2017. The increase was mainly driven by the inclusion of amounts attributable to the fair value of identifiable non-current assets of our Groups 50% participating interests in the North Sabah PSC upon completion of the acquisition. Current assets increased from RM83.6 million as at 30 June 2017 to RM402.5 million as at 30 June 2018. From the Completion Date of our Groups acquisition of 50% participating interests in the North Sabah PSC to 30 June 2018, our Group achieved sales of 623,544 barrels of crude oil from the asset via two cargoes. As of 30 June 2018, only proceeds from one of the two offtakes were included in the cash balance. Proceeds from the second crude oil offtake amounting to RM95.8 million were received on schedule on 24 July 2018. Cash and bank balance increased by RM81.5 million, largely due to the timely collection of proceeds from crude oil offtakes in both the Anasuria and North Sabah PSC segments by 30 June 2018. In addition, other operational-related receivables in North Sabah PSC and Anasuria amounted to RM66.5 million and RM13.6 million respectively. Inventories have increased by RM53.9 million largely due to higher crude oil balances as at the end of FY2018. The total liabilities for the year 2018 was amounted by RM577.72 million to RM978.2 million. The increase in total liabilities include the following significant transactions relating to the North Sabah PSC that is Present value of decommissioning costs upon completing the acquisition, amounting to RM127.7 million by reimbursement to Sabah Shell Petroleum Company Limited and Shell Sabah Selatan Sdn Bhd (collectively the Sellers), being the sellers of the 50% participating interests in the North Sabah PSC to our Group, of over a period of three years from 2019 to 2021 for recoverable capital expenditure incurred by the Sellers as part of its executed work programme but not yet recovered as of 1 January 2017 (being the effective date of the acquisition), subject to oil prices having reached certain thresholds. The net present value of the amount recognized as at 30 June 2018 is RM112.6 million, operations-related payables and accruals of RM80.3 million and provision for taxation of RM44.9 million. In addition, as at 30 June 2018, our Group recorded its share of higher liabilities of the joint operating company, Anasuria Operating Company Limited, compared to 30 June 2017 relating to capital expenditure and operational activities, amounting to RM53.3 million.
Last but not least, Hibiscus Petroleum Bhd is going to focus on its current assets while maintaining a conservative debt-to-equity ratio as the company looks to remain in a healthy financial position on a stable oil price floor. According to the Manager Director, Kenneth Pereira has stated that the stability in oil prices is key for the oil and gas exploration and production company going forward fiscally. Upon completion of the US$25 million acquisition, the groups production rate is expected to reach 9,000 barrels per day from the current 4,000. The companys cash flow will be based on investment analysis of US$55 per barrel on the Brent index. It is also voting on the proposed issuance of up to 317.64 million free warrants today, which is primarily a mid-term capital raising exercise to keep its debt-to-equity ratio at a conservative level (Rao,2018).
Figure 2 shows the trend analysis of Market to book ratio for Hibiscus Petroleum Berhad for the past 3 years
Based on figure 2 above, for the past 3 years which is 2016 to 2018 has shown low ratio which is less than 1. This indicates that the stock is undervalued which has shown that Hibiscus Petroleum has bad investments. Furthermore, certain oil companies have sent some feedback that equity issuance was not the ideal funding strategy as the company share price is relatively low and the effective dilution to existing shareholders would be expensive. The certain company has their debt in the balance sheet but unfortunately, domestic banks in Malaysia have no capacity or also knows as little appetite to take on further oil and gas related debt for Hibiscus Petroleum Berhad. So, therefore, Hibiscus Petroleums balance sheet is debt free. (HibiscusPetroleumAnnualReport,2016). According to the Chairman of Hibiscus Petroleum, Zainul Rahim Mohd Zain stated that there was a backdrop of oil price volatility, Hibiscus Petroleum aims to keep its costs low to help maintain the profitability once the oil price hits below the level. This has also happened in the year of 2014 where the company has lost a few million on this petroleum (Nst.com.my,2018).
From 2015 to 2018, Malaysia experiences a downturn in the oil and gas market; however, with the current uptrend of the crude oil prices, the sector is slowly recovering from its slump. Generally speaking, the best prospects for the Oil & Gas sector in Malaysia are in deep and ultra-deepwater sustainable exploration and production. Strong market prospects include drilling tools, finishing tools, pressure control equipment, mud equipment, cementing equipment, perforating systems, multilateral good completion systems, core completion products, down-hole testing systems, blowout preventer systems, artificial lift systems, sub-sea Christmas trees, etc (Export.gov,2018)
In the year of 2016, the crude of oil prices has shown low among due to the budget 2016 that has been stated by the former prime minister in Malaysia. Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid described the sector this year as weak in various fronts. For example, Petronas has seen the sharp fall due to the capital expenditure which was down 28%, year-to-date, for the nine-month 2016 period to RM35.9bil from RM49.7bil in the corresponding period in the year of 2015 (TheStar,2016). As for the year 2018, Finance Minister Lim Guan Eng has stated that crude oil prices have gone on a freefall, down by over 37% in less than three months (Kana,2018). As for the overall energy sector in Malaysia, Petronas has shown a better market performance compared to the Hibiscus Petroleum