• PDB’s 1HFY17 core profit grew 6% yoy to RM490.6m and was broadly in-line with ours and consensus expectations at 54% and 52% respectively. 2Q17 core profits, however, eased by 2% on lower sales volume.

• Operating profits dropped slightly on quarterly basis as drop in retails profits had more than offset higher commercial profits

• Declared 2nd interim dividend of 14 sen per share

• We retain our HOLD recommendation with an unchanged TP of RM25.60 based on PER of 28x of FY17 EPS

Higher revenue boosting headline profits

PDB’s 1HFY17 headline profits grew 23% driven by higher revenue derived from both the retail and commercial segments. However, adjusting for impairment of subsidy receivables of RM89.9m and gain on asset disposal of RM11.9m in 2Q16, core profits rose 6% to RM490.6m. All in, core profits were within expectations, making up 54% and 52% of ours and consensus estimate, respectively.

2Q17 core profit dip on lower sales volume

PDB’s core profit posted a marginal decline of 2% yoy at RM235.3m, mainly due to higher effective tax rate and lower sales volume in both retail and commercial segments by 4% and 6% respectively.

Retail segment dragged qoq performance

On quarterly basis, the topline eased 2.7% as the impact from a 5% decline in ASP was mitigated by higher sales volume which grew 3% qoq. Retail margin, however, came under pressure arising from lower MOPS price and higher operating expenditure on the back of increase in salaries, wages and benefits.

Declared 2nd interim dividend of 14 sen

A second interim DPS of 14 sen was declared, payable on 19 Sep 17. This implies a payout ratio of 58% against its headline profit. Collectively, total DPS declared in 1H17 amounts to 28 sen, which is higher than the 26 sen DPS declared over 1HFY16.

Maintain our forecast, retain HOLD

As 1H17 results came within our projection, we made no changes to our FY17 full year forecast. Hence, we retain our HOLD recommendation on the stocks with unchanged TP of RM25.60, pegged 28x PE to FY17 EPS which is based on its 5-year average historical PE

Source: BIMB Securities Research - 22 Aug 2017