Period  4Q13/FY13 for Wilmar International Ltd.

Actual vs. Expectations Wilmar’s FY13 core net profit* of USD1.30b is very much in line; at 99% of consensus forecast of USD1.31b and spot on ours of USD1.30b.

Dividends  As expected, a final tax-exempt dividend of SGD 5.5 cents was announced.

Key Results Highlights YoY, Wilmar’s FY13 core net profit increased 12% to USD1.30b due to the strong recovery in its Oilseeds and Grains (OAG) division which registered PBT of USD232m (against USD14m last year). Note that Wilmar China’s crush margin was especially strong in 4Q13 due to higher local soybean meal prices in China. However, the earnings growth was capped due to a 34% decline in earnings from palm oil upstream division in line with lower CPO prices.

 QoQ, Wilmar’s 4Q13 core net profit declined 10% to USD353m as its sugar milling division suffered a small loss before tax of USD1m due to early crushing completion in 3Q13. This is not a concern as we believe that the season for cane harvesting has started earlier in Australia in 3Q13 due to the dry and favourable weather there.

Outlook  The stellar performance from the OAG division should alleviate concerns regarding the negative margin issue which has affected Wilmar’s earnings in FY12. As for the palm oil upstream division, earnings prospect should improve as CPO price has recovered to above RM2700/mt recently. Overall, we expect better core earnings of USD1.44b for Wilmar in FY14E or 11% growth YoY.

Change to Forecasts Although the result is only at par with our estimate, its contribution to PPB earnings will be higher due to higher-than-expected USD/MYR rate. We have increased our USD/MYR assumption to 3.25 (from 3.17) for both FY13E and FY14E. As a result, PPB’s FY13E net earnings has been increased by 2% to RM890m while FY14E net earnings is increased by 2% to RM962m.

Rating Maintain OUTPERFORM PPB is a net beneficiary of higher USD/MYR rate in the near term.

Valuation  We upgrade our TP to RM17.00 (from RM16.60) based on an unchanged Fwd. PER of 20.9x on higher FY14E EPS of 81.2 sen (from 78.8 sen).

Risks to Our Call Lower-than-expected earnings from Wilmar or PPB’s own business divisions.

Source: Kenanga