Rising Southeast Asian Demand Will Secure A Resilient Energy Future

Key Takeaways

• Strategic acquisitions and synergistic production hubs ensure long-term growth, higher margins, and industry-leading reserves replacement despite industry constraints.
  
• Strong internal funding, government support, and scale position Hibiscus to benefit from energy security priorities and favorable supply agreements.
  
• Strategic focus on traditional oil and gas faces mounting risks from global energy transition, regulatory pressures, operational costs, and uncertainty in reserve and production sustainability.

Catalysts

Engages in the exploration, development, and sale of oil and gas.

• While analysts broadly agree the PM3 CAA extension adds significant reserves and value, they vastly understate its impact: not only does the 20-year extension add 26 million barrels of 2P and 2C reserves for zero consideration, but it also establishes a synergistic hub spanning PM3 and adjoining fields, unlocking much greater production longevity and lower cost-per-barrel for decades, likely boosting both revenue and EBITDA margins well above consensus expectations.
  
• Analyst consensus expects the Brunei acquisition to lift revenue, but the true upside is much greater-the asset is already contributing 23% of group revenue with only a partial year, and Hibiscus now enjoys robust local banking relationships and government support, positioning it uniquely to secure additional high-quality acreage in Brunei, thus enabling compound production and earnings growth over the long term.
  
• Hibiscus's extraordinary reserves replacement ratio of over 200 percent-double the industry norm-demonstrates a consistently successful acquisition and development strategy that ensures upwards production and cash flow growth even as the industry's global supply remains constrained, positioning the company for sustainably rising operating cash flow and EPS.
  
• The company's ability to fully fund multi-year capital expenditure solely from internal cash flow and existing facilities, with a rising net cash balance and zero dilution, means Hibiscus can opportunistically capitalize on any industry underinvestment or asset sales without straining the balance sheet, likely accelerating both production and earnings per share.
  
• With Southeast Asian and regional governments increasingly prioritizing energy security and local sources, Hibiscus's growing regional scale, strategic production hubs, and established track record position it to benefit from preferential supply contracts and supportive fiscal regimes, fostering durable revenue visibility and superior returns amid rising energy demand.

Hibiscus Petroleum Berhad Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Hibiscus Petroleum Berhad compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Hibiscus Petroleum Berhad's revenue will grow by 2.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.2% today to 19.2% in 3 years time.
• The bullish analysts expect earnings to reach MYR 511.6 million (and earnings per share of MYR 0.67) by about August 2028, up from MYR 151.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 4.2x on those 2028 earnings, down from 7.2x today. This future PE is lower than the current PE for the MY Oil and Gas industry at 15.4x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.91%, as per the Simply Wall St company report.

Hibiscus Petroleum Berhad Future Earnings Per Share Growth

Risks

• The accelerating global transition toward renewables and dampening oil demand pose a long-term risk to Hibiscus Petroleum's core revenue, as the company's continued focus is on expanding conventional oil and gas assets even as global energy use shifts away from fossil fuels.
  
• Intensifying climate-related regulations, including the recent UK Energy Profits Levy and potential future carbon taxes, continue to create unpredictable and rising tax and compliance costs for Hibiscus, which may exert sustained downward pressure on net earnings and returns.
  
• The company's heavy reliance on assets in Malaysia, Brunei, and the UK exposes it to regulatory and geopolitical risks that could disrupt operations or alter fiscal regimes, increasing long-term uncertainty around revenue stability and margins.
  
• Reserve and production sustainability remain in question, with a significant portion of future growth hinging on successful conversion of 2C resources and potential new discoveries; failure to deliver on these could lead to asset depletion, declining production volumes, and reduced cash flows.
  
• Persistently high operating and extraction costs-including inflationary OpEx, maintenance shutdowns, and decommissioning-combined with structurally volatile and potentially declining oil prices threaten to erode EBITDA margins and overall profitability over time.

Valuation

• The assumed bullish price target for Hibiscus Petroleum Berhad is MYR2.72, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Hibiscus Petroleum Berhad's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MYR2.72, and the most bearish reporting a price target of just MYR1.53.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be MYR2.7 billion, earnings will come to MYR511.6 million, and it would be trading on a PE ratio of 4.2x, assuming you use a discount rate of 9.9%.
• Given the current share price of MYR1.48, the bullish analyst price target of MYR2.72 is 45.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.