Period

4Q15/FY15

Actual vs. Expectations

PPB’s FY15 core net profit (CNP*) at RM1.02b was in line with consensus (RM0.97b) at 103% and ahead of our forecast (RM0.94b) at 108%.

The key variance was higher-than-expected contribution from Wilmar on favourable exchange rates. Note that ex- Wilmar PBT at RM242.5m is in line with our forecasted RM245.6m.

Dividends

A final dividend of 17.0 sen was announced for FY15 raising total dividend to 25.0 sen, exceeding our expected 22.9 sen, for a payout ratio of 29%.

Key Results Highlights

YoY, FY15 CNP improved 11% as Wilmar’s contribution improved 10%. This was largely due to translation gains on stronger USD/MYR exchange rate, as Wilmar’s FY15 CNP declined 4% to USD1.17b on softer Tropical Oils (TO) and Sugar segments’ contributions (-44% and - 38%, respectively) which outweighed stronger Oilseed and Grains (O&G) PBT (+98%). PPB’s own operations PBT rose 35% on stronger Grains contribution (+37%) from better sales volume and margin improvement on lower raw material costs.

QoQ,4Q15 CNP improved 27% as Wilmar contribution rose 30% on favourable exchange rates. Recall that Wilmar’s QoQ CNP was flat (-2% to USD350m) as TO PBT improvement (+7%) was offset by weaker O&G contribution (-33%). PPB’s own PBT declined 3% as stronger Consumer (+188%) and Film (+44%) contributions were offset by Other segment’s losses (RM3.2m) and softer Grains PBT (-4%) due to unfavourable forex translation.

Outlook

We are overall neutral on PPB’s own operations. While Film earnings should be sustained by strong movie title line-ups and new cinemas, management noted that “private consumption will moderate as households adjust to the rising cost of living and the impact of a weaker Ringgit” while Property sales are likely to be affected by the “weak property market sentiment”. Nevertheless, PPB’s overall financial results continue to be contingent on Wilmar’s performance (refer overleaf).

Change to Forecasts

No changes to FY16E CNP as we introduce our FY17E CNP of RM1.10b.

Rating

Maintain MARKET PERFORM

We maintain our neutral long-term view on Wilmar as its improving TO’s outlook is limited by softening Chinese demand. For PPB’s own businesses, we are neutral as the decent Grains and Film outlook could be offset by other segments experiencing weaker market demand.

Valuation

Maintain our TP at RM16.92 based on unchanged Fwd. PER of 19.5x applied to FY16E EPS of 86.7sen.No change to our 19.5x Fwd. PER valuation basis which is based on the 3-year historical mean valuation, justified by our neutral outlook for both Wilmar and PPB.

Risks

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

Weaker consumer sentiment may impact sales.

Source: Kenanga Research - 29 Feb 2016