Period     1Q13

Actual vs. Expectations    PPB’s 1Q13 core net income of RM221m was in line with both the consensus and our estimates. It made up 25% of the consensus forecast of RM898m and 26% of our forecast of RM851m.

Dividends    No dividend was announced as expected.

Key Results Highlights      YoY, the 1Q13 core net profit jumped 24% to RM221m in line with the better contribution from Wilmar. Note that Wilmar’s contribution surged 26% YoY to RM178m due to a turnaround in its Oilseeds And Grains (OAG) division. As mentioned in our report on 9 May, Wilmar’s OAG division crushing margin remained positive (against losses last year) due to lower cost of imported beans and higher local product prices.

QoQ, the 1Q13 core net profit declined 28% in line with a lower earnings contribution from Wilmar. We are not concerned over the QoQ decline in Wilmar’s earnings as this was caused by the seasonal factor in its Plantation and Palm Oil Mills (PPO) division, which typically experienced a seasonally low FFB production in the 1Q.

Outlook    We believe that the worst should be over for PPB as Wilmar’s OAG division crushing margin has stayed positive for the last three quarters and is likely to stay positive for the rest of the year. Hence, PPB’s earnings are likely to improve YoY. Note that the contribution from Wilmar made up 76% of PPB’s PBT in FY12.

Change to Forecasts    Maintaining our FY13E-FY14E earnings of RM851m-RM862m.

Rating  Maintain OUTPERFORM

Valuation     Maintaining our TP of RM15.20 based on a Fwd. PER of 20.9x on its FY14E EPS of 72.7 sen.

Risks    Lower than expected margins in Wilmar’s  OAG division.

Source: Kenanga