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PPB Group - FY12 result may surprise on the upside

kiasutrader
Publish date: Mon, 25 Feb 2013, 09:15 AM
kiasutrader
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Period  4Q12 and FY12 for Wilmar International Ltd.

Actual vs. Expectations Wilmar's FY12 core net profit* of USD1.17b came in above both the consensus and our expectations. It made up 104% of the consensus' FY12 forecast of USD1.12b and 113% of our forecast of USD1.04b.

 Wilmar's Oilseeds and Grains (OAG) division registered a better-than-expected PBT of USD46m in 4Q12 and turned the division's FY12 results into profitability with USD14m in PBT (against a USD32m Loss Before Tax in 9M12). The strong turnaround should be due to Wilmar's prudent management of its soybean crushing margin by performing crushing only when it was profitable to do so.

Dividends  A final ordinary dividend of S$0.03 was announced. In line with the better than expected earnings, the dividend was better than our expectation of S$0.02.

Key Results Highlights  QoQ, Wilmar's 4Q12 core net profit improved 3% to USD401m. The higher profits (PBT) from its Palm and Laurics (PAL) and Sugar divisions were neutralised by the lower profit from its OAG division, leading to just the small overall rise.

 YoY, Wilmar's FY12 core net profit declined 23% to USD1.17b, caused mainly by the 97% fall in its OAG's division PBT to USD14m. That said, the OAG division did recover strongly in 2H12 from 1H12 Loss Before Tax of USD92m.

Outlook  We believe the worst could be over for PPB with possible positive earnings surprise in its FY12 result (due 27-Feb or 28-Feb). FY13E outlook also seems better with Wilmar's management revealed that the company's soybean crushing margin had improved in China. This is in line with our view of a lower input cost (soybean) due to the expected bumper crop in South America.

Change to Forecasts  We have raised PPB's FY12E earnings by 7% to RM748m after taking into account the better than expected margin at Wilmar's OAG division. Our FY13E earnings are maintained at RM832m as we had already assumed OAG division earnings to recover in FY13E to a PBT of USD150m.

Rating   Maintain OUTPERFORM

Valuation  Maintaining our TP of RM14.38 based on a Fwd.
PER of 20.9x on its FY13E EPS of 68.8sen.

Risks  Below expectation margins for the OAG and PAL divisions.

Source: Kenanga
PPB (4065)
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