Journey to Wealth
PPB Group - 9M12 within expectations
Period 3Q12/ 9M12
Actual vs. Expectations PPB's 9M12 core net profit of RM536m came in within both the consensus and our expectations. It made up 79% of the consensus' FY12 forecast of RM678m and 77% of our forecast of RM700m.
Dividends No dividend was announced as expected.
Key Results Highlights QoQ, PPB's 3Q12 core net profit surged 130% to RM249m in line with the better contribution from Wilmar at RM231m (+140%). Note that Wilmar's 'Oilseeds and Grains' (OAG) division has returned to profitability with a PBT of US$60m as compared to a US$40m Loss Before Tax in 2Q12. This was caused by improved soybean crush margin in China and timely purchase of raw materials.
YoY, PPB's 3Q12 core net profit improved 9% to RM249m. Although Wilmar contribution surged 29% to RM231m, PPB's 'grains trading, flour and feed milling' (GFM) division PBT tumbled 69% to RM8m due to unfavourable grains trading and forex hedging.
Outlook Wilmar's OAG division profitability is still uncertain in 4Q12 as industry back-to-back soybean crush margin in China has been mostly negative recently. Hence, we believe PBT contribution from Wilmar to PPB should decline 35% YoY to RM511m in FY12E.
Change to Forecasts We have cut our FY13E earnings by 1.5% to RM819m in line with our lower average CPO price assumption for CY13 of RM2850 (previously RM3000). For every RM100 drop in the CPO price, we expect FY13E earnings to decline by 1.0%. Maintain FY12E earnings of RM700m.
Rating Maintain MARKET PERFORM
Uncertainty for Wilmar's OAG division profitability in 4Q12 should keep the upside for PPB's share price limited. However, its downside is supported by the book value of RM11.75 as of 3Q12.
Valuation We have trimmed our TP slightly to RM14.38 (from RM14.60) based on an unchanged Fwd. PER of 20.8x on a lower FY13E EPS of 69.1 sen (from 70.2 sen previously).
Risks Worse than expected margins for Wilmar's OAG division.
A sustained drop in CPO prices.
Source: Kenanga
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