"Like many of its peers, robust cashflows can be expected from HSPLANT over FY21-23 but not many of its peers has a balance sheet as “liquid” as HSPLANT," said the research firm.
It added that the group ended 3QFY21 with RM346mil in net cash while 4Q operating cashflow is set to stay strong.
Kenanga expects Hap Seng Plantations to see a surge in FY21 core net profit from RM69.3mil in FY20 to RM190mil due to all-time-high CPO prices.
In addition, Hap Seng Plantations announced on Monday the completion of its divestment of Mull Hill Estate, which comprises seven parcels of agriculture land in Tawau, Sabah, to its parent company Hang Seng Consolidated Bhd.
According to Kenanga, the impact of the divestment on FY22 core earnings per share will be marginal but there will be a one-off disposal gain of RM23.4mil.
"We are expecting FY21 full-year net dividend to double from seven sen in FY20 to 14 sen.
"As an interim 1.5 sen dividend was paid in Sept, an estimated final dividend of circa 12.5 sen is estimated for FY21," it said.
Kenanga expects dividends in FY22-23 to be 10 to 11 sen.
The research firm maintained its "outperform" recommendation on Hap Seng Plantations and raised its target price to RM2.65.