Period  3Q14 and 9M14 for Wilmar International Ltd.

Actual vs. Expectations Wilmar’s 9M14 core net profit* (CNP) of USD808m is within expectations as it makes up 71% of consensus’ forecast (USD1.14b) and 79% of ours (USD1.01b).

Dividends  As expected, no dividend was announced.

Key Results Highlights

 YoY, Wilmar’s 9M14 CNP declined 15% to USD808m. Although Oilseeds And Grains (OAG) division made a strong turnaround in 3Q14, its 9M14 PBT remained lower YoY (-59% to USD47m) due to a weak 1H14. Note that OAG division registered PBT of USD101m in 3Q14 and hence caused 9M14 PBT to turn positive to USD47m (against 1H14’s Loss Before Tax of USD53m). Palm & Laurics (P&L) PBT also declined 44% YoY to USD370m in 9M14 due to excess refining capacity in the palm downstream industry. However, Plantation performed well with PBT jumping 66% YoY to USD304m.

 QoQ, Wilmar’s 3Q14 core net profit surged 164% to USD430m as OAG division registered a strong jump in PBT to USD101m (from USD4m in 2Q14).

Outlook  Although the outlook for OAG division has improved significantly, P&L division’s outlook is unexciting as we think that the structural issue of excess refining capacity in the palm downstream industry is likely to persist for at least the next 6-12 months. This is expected to keep the P&L division’s margin smaller against what was achieved last year.

Change to Forecasts No changes to PPB’s FY14E earnings (RM742m) and FY15E earnings (RM911m).

Rating Maintain MARKET PERFORM

Positive impact from strong earnings recovery in OAG division is likely to be neutralised by thinning margin in P&L division.

Valuation  Our TP is maintained at RM15.00 based on an unchanged Fwd. PER of 19.5x on FY15E EPS of 76.9 sen.

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

Source: Kenanga