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PPB Group - Wilmar's 9M12 result in line

kiasutrader
Publish date: Mon, 12 Nov 2012, 09:35 AM
kiasutrader
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Period   3Q12 and 9M12 for Wilmar International Ltd

Actual vs. Expectations    Wilmar's 9M12 core net profit* of US$766m came in within both the consensus and our expectations. It made up 74% of the consensus' FY12 forecast of USD1.03b and 76% of our forecast of USD1.00b.

Dividends    No dividend was announced as expected. 

Key Results Highlights    QoQ, Wilmar's 3Q12 core net profit surged 125% to USD388m as its 'Oilseeds and Grains' (OAG) division returned to profitability. Note that the OAG division itself registered PBT of USD60m as compared to a USD40m Loss Before Tax (LBT) incurred in 2Q12. This was caused by improved soybean crush margin in China and the timely purchase of raw materials.

YoY, the 3Q12 core net profit declined 14% to USD388m as the OAG division's margin remained thin possibly due to overcapacity in China's soybean crushing industry. Note that the OAG division's PBT of USD60m is still 40% lower YoY (against 3Q11 PBT of US$100m). The lower performance was mitigated, to a certain extent, by the higher PBT in the 'Palm and Laurics' (PAL) segment of US$181m (+6% YoY). 

Outlook  We believe the return of the OAG division to profitability may be short-lived. Data from Shanghai JC Intelligence Co shows that China's Soybean Crush Margin has returned to negative in 4Q12. Hence, we still believe the OAG division will be in the red for FY12E, although the loss will be likely smaller than previously expected.

Change to Forecasts     Raised PPB's FY12E earnings by 2% to RM700m after assuming a lower loss for Wilmar's OAG division. FY13E earnings maintained at RM832m.

Rating    Maintain MARKET PERFORM

Uncertainty for Wilmar's OAG division profitability in 4Q12 should keep PPB's share price upside limited. However, the downside is supported by its book value of RM11.98 as of 2Q12.

Valuation     Maintaining our TP of  RM14.60 based on Fwd.
PER of 20.8x on FY13E EPS of 70.2sen. Our Fwd PE of 20.8x is based a -0.5 SD on the historical 3-year Forward PER.

Risks    Worse than expected margins for the OAG and PAL divisions. 
Sustained drop in CPO prices.  

Source: Kenanga
PPB (4065)
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