Period

1Q15

Actual vs. Expectations

PPB’s 1Q15 core net profit (CNP*) at RM233m met expectations, at 24% of both consensus and our forecast of RM972m and RM973m, respectively.

Excluding Wilmar’s contribution, 1Q15 PBT at RM74m was also in-line, making up 21% of our forecast PBT (ex-Wilmar) of RM351m.

Dividends

No dividend was announced, as expected.

Key Results Highlights

Due to an adjustment in reporting segments, some segment data are unavailable for 4Q14. For details, see the Segmental Breakdown table on Page 2.

YoY, 1Q15 CNP jumped 61% to RM233m as Wilmar’s contribution rose 64% to RM159m. Recall that Wilmar’s 1Q15 CNP improved 22% on an 11x improvement to USD166m in its Oilseeds and Grains (O&G) segment, partly limited by a softer Tropical Oils segment (-44% to USD152m). PPB’s own operations saw PBT improvement (+53% to RM74m) largely due to stronger Grains and Agribusiness (G&A) segment’s PBT (+89% to RM79m) as both its animal feed and flour operations saw sales volume improvement while its net grains hedging position was positive.

QoQ, 1Q15 CNP slipped 19% mainly due to lower profit contribution from Wilmar (-39% to RM159m) which saw lower CNP (-36%) as its Sugar segment registered seasonal losses due to plant maintenance. However, PPB’s own businesses strengthened as PBT (ex-Wilmar) rose 70% to RM74m. Notably, the G&A segment’s PBT improved 334% to RM79m for the reasons outlined above.

Outlook

Although management expects household spending post-GST to be subdued in 2Q15, they believe the impact will be temporary and consumer confidence should improve in 2H15. Nevertheless, PPB’s overall financial results will continue to be contingent on Wilmar’s performance.

However, we are neutral on Wilmar as we think their improving O&G and plantation downstream segment could be limited by its uninspiring Plantation upstream and Sugar segments.

Change to Forecasts

No change to our FY15-16E numbers.

Rating

Maintain MARKET PERFORM

We maintain our neutral outlook on Wilmar as its better O&G outlook is limited by the lacklustre Plantations upstream’s performance. For PPB’s own businesses, we think upside is limited as we expect only 6%-1% PBT growth in FY15 and FY16.

Valuation

We upgrade our TP to RM16.43 (from RM16.00) as we partly roll forward to FY16 using the average FY15-16E EPS of 84.2 sen (previously FY15E EPS of 82.1 sen). No change to our 19.5x Fwd. PER valuation basis which is based on the 3-year historical mean valuation, justified by our neutral earnings growth outlook for both Wilmar and PPB.

Risks to Our Call

Lower-than-expected earnings from Wilmar or PPB’s core business divisions.

Weaker consumer sentiment may impact sales

Source: Kenanga Research - 22 May 2015