• PDB’s 1QFY17 core earnings grew by 16% yoy but flat qoq to RM255m which were broadly in-line with ours and consensus expectations.

• On quarterly basis, operating profit was flat, dragged by shrinking in retails margin

• We revised our earnings higher to better reflect its higher interest income than previously projected

• We retain our HOLD recommendation with a new TP of RM25.60 based on PER of 28x of FY17 EPS Core net profit met expectation

PDB’s 1QFY17 result came in largely within our expectation at RM253m, making up 28% and 27% of ours and consensus estimate, respectively. The core profit grew 16% yoy supported by higher ASP but it was rather flat qoq as higher ASP was negated by lower other income and higher operating cost.

Higher ASP boosted revenue

Topline was boosted by higher average selling price (ASP) despite lower sales volume. ASP were higher by 43% yoy (qoq: +18%), boosting revenue by 35.6% (qoq: +11.3%) despite lower sales volume by 4% (qoq: -6%).

Operating profit was flat on qoq basis

On quarterly basis, operating profit was 0.8% lower as operating profits from retails segment dropped by 16%, partly due to lower margins from mogas and diesel. The drop however was negated by 26% increase in commercial segment underpinned by higher gross profit.

Declared an interim dividend of 14 sen

PDB declared its first interim dividend of 14 sen per share. This was higher than Q1FY16 dividend of 12 sen per share.

Changes to our model

We tweaked our model to better reflect its higher interest income than previously projected, arising from large cash pile of RM2.3bn. This led to 5%/4%/5% hike in FY17/FY18/FY19 earnings respectively.

Retain HOLD recommendation

Following our earnings revision, we raised our TP to RM25.60 (from RM24.50) as we pegged 28x PE to FY17 EPS which is based on its 5-year average historical PE.

Source: BIMB Securities Research - 19 May 2017