Headline profits boosted by asset sales
PDB’s 3Q17 headline profits more than doubled after one off gain arising from the divestment of its subsidiary in the Philippines and LPG business in Vietnam which amounted to RM430.8m. Still, adjusting for this, core profit grew 44% yoy, pushing 9M17 core profit to RM797m; this is ahead of ours and consensus expectations at 87% and 84% respectively.
Higher retail margin boosted 3Q17 core profits
PDB’s 3Q17 core profit grew by 44% yoy and 40% qoq to RM331m underpinned by higher operating margins from the retail segment at 7.8% (3Q16: 6.1%, 2Q17: 4.5%). This mainly arose from lag gain impact which led to higher ASP and more than offset declining sales volume. Earnings also grew over qoq basis in the same vein. Performance of the Commercial segment was also strong as PDB manage to capture the growth in the Aviation and Diesel segments.
Declared 3rd interim dividend of 20 sen
A third interim DPS of 20 sen was declared, payable on 8 Dec 17. This brings total 9M17 DPS declared to 48 sen which is higher than the 40 sen DPS declared over 9MFY16.
Raise our forecast
We raised our earnings forecast for 2017F/2018F/2019F by 12%/5%/2% respectively to reflect higher-than-expected ASP and operating margin for the retail segment as well as factoring in the declining sales volume.
Upgrade to BUY with new RM26.60 TP
We upgrade PDB to BUY (from Hold) with a new RM26.60 TP which is arrived after applying a 27x PE to FY18 EPS. The multiple is based on its 5-year historical PE average. Our recommendation upgrade is also on the back of the recent share price weakness as we see PDB’s fundamentals are largely intact.
Source: BIMB Securities Research - 13 Nov 2017
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