PPB’s 1Q19 core net profit of RM243.6m (+21.8% yoy) came in within expectations. The company saw higher profits from grains & agribusiness, film exhibition & distribution and its associate Wilmar, but this was partially offset by lower contributions from its consumer products, environmental engineering and property divisions. We make no changes to our 2019-21 core EPS forecasts as there were no major surprises in the results. We maintain our DCF-derived TP at RM19.50 and HOLD rating for PPB.

1Q19 Core Net Profit Up 21.8% Yoy to RM243.6m

PPB Group Berhad (PPB) reported a slightly higher 1Q19 revenue of RM1.16bn, up 1% yoy, mainly attributable to higher contribution from the grains & agribusiness, consumer products, film exhibition & distribution and property divisions. PPB’s PBT for 1Q19 increased by 33.6% yoy to RM279.9m, mainly due to higher profit contributions from the grains & agribusiness (due to improved margin from the flour segment), film exhibition & distribution (due to better movie titles released and increased contribution from its Vietnam operations), and Wilmar (due to higher margin from its tropical oils and sugar divisions). This was partially offset by lower profits from the consumer products, environmental engineering and property divisions. After adjusting for one-off items, PPB’s 1Q19 core net profit increased by 21.8% yoy to RM243.6m, accounting for 21% and 20% of our and the consensus 2019 forecasts, respectively. This was within expectations.

Weaker Sequentially as Expected

PPB’s 1Q19 revenue was lower by 0.7% qoq to RM1.16bn, while core net profit declined by 17.4% qoq to RM243.6m. This was largely expected as 1Q is normally the weakest quarter due to the seasonal factor (Wilmar’s production in 1Q is usually affected by the monsoon weather).

Maintain HOLD and TP of RM19.50

We make no changes to our 2019-21 core EPS forecasts post the 1Q19 results as there were no major surprises. We maintain our DCF-derived target price on PPB of RM19.50 and our HOLD rating.

Source: Affin Hwang Research - 30 May 2019