• Overview. 2Q20 PATAMI came in higher yoy as revenue increased 17% to RM1.07bn on improved sales in MPM and ILF divisions accompanied by margins expansion and lower operating costs. On quarterly basis, profit grew 38% resulted from better margins from all division assisted by lower effective tax rate.
   
• Key highlights. 1H20 saw Group’s earnings and revenue grew by double digit, backed by higher contribution from both MPM and ILF division including “Family Mart” business, as well as higher share of profit of associate amounting to RM5.5m as opposed to RM5.1m in 1H19.

• Against estimates: inline. 1H20 profit was in line with our estimates as higher revenue from MPM and ILF, and improved margin from MPM division drove profit higher. Group’s PBT margin was maintained at 7% yoy with MPM margins expanded to 17% from 14% in 1H19.

• Outlook. We believe our earnings forecast is achievable judging from the Group’s resilient business model that caters to basic consumer food market with inelastic products demand. In addition, its “Family Mart” stores have also contributed significantly to the increase in ILF segment revenue with 145 stores in operations as at end October 2019.

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

Source: BIMB Securities Research - 2 Dec 2019