• Overview. 1Q20 core profit came in higher yoy as revenue increased accompanied by better margin from MPM division. On qoq basis, core profit grew 17% aided by higher contribution from MPM division and lower effective tax rate.

• Key highlights. Growth at revenue level was due to higher contribution from MPM division and ILF division as well as “Family Mart” business.

• Against estimates: inline. 1H19 core profit was in line with our estimates as higher revenue from MPM and ILF, and improved margin from MPM division drove the profit higher; Group PBT margin was maintained at 6% yoy.

• Outlook. We believe our earnings forecast is achievable from the Group’s unique diversified business model and the ability to even out the negative effects attributed to seasonal or cyclical factors of its MPM and POA divisions. In addition, its “Family Mart” stores have also contributed significantly to the increase in ILF segment revenue with 118 stores in operations to-date.

• Our call. Maintain HOLD with unchanged SOP-derived TP of RM7.15 as we believe fundamentals have been well reflected.

Source: BIMB Securities Research - 29 Aug 2019