Period  1Q14

Actual vs. Expectations PPB’s 1Q14 core net profit (CNP) of RM144m is weak as it makes up 15% of consensus forecast (RM0.94b) and 14% of our forecast (RM1.05b) for FY14. However, it is not totally unexpected as we have highlighted previously that the Loss Before Tax (LBT) at Wilmar’s Oilseeds and Grains (OAG) division is likely to affect PPB’s 1Q14 result.

Dividends  As expected, no dividend was announced.

Key Results Highlights YoY, 1Q14 CNP slipped 35% to RM144m due to lower profit contribution from Wilmar (-46% to RM97m). As mentioned previously, Wilmar earning is lower due to LBT experienced at its OAG division. However, PPB’s own operations earnings growth with EBIT rising 17% to RM78m cushioned the earnings decline at the Group level.

 QoQ, 1Q14 CNP declined 49% to RM144m due to lower profit contribution from Wilmar (-56% to RM97m). Reason for lower Wilmar contribution QoQ is the same as mentioned above.

Outlook  Management guided that PPB’s own core operations are expected to achieve good results but its overall financial result will continue to be contingent on Wilmar’s performance.

 In our view, PPB’s FY14E CNP should decline slightly by 3% to RM938m due to expected lower earnings contribution from Wilmar.

Change to Forecasts Maintain our earnings forecast for both FY14E (RM938m) and FY15E (RM968m). Despite the weak 1Q14 earnings for PPB, we believe that its 2H14 is likely to be better. Note that Wilmar’s sugar milling business in Australia seasonally make loss in the first half before returning to profitability in the second half due to the timing of sugar cane harvesting.

Rating Maintain MARKET PERFORM

 Short-term catalyst is limited due to weak 1Q14 earnings.

Valuation  Maintain our TP of RM16.55 based on unchanged Fwd. PER of 20.9x on CY14E EPS of 79.1 sen.

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

Source: Kenanga