1HFY21 core PATAMI of RM625.3m (+33% YoY) is deemed within both our (46%) and consensus’ (43%) expectations. DPS of 10.0 sen is also within expectations. We expect seasonal improvements in 3Q-4QFY21 earnings – Wilmar’s strong plantation, crush margin improvements, and on-going sugar crushing season to overshadow PPB’s weak film segment and muted grains and agribusiness margins (high raw material costs). Maintain MP with SoP-derived TP of RM19.40.

Within expectations. 2QFY21 core PATAMI of RM273.4m (-22% QoQ; +3% YoY), brought 1HFY21 core PATAMI to RM625.3m (+33% YoY), which is deemed within both our (46%) and consensus’ (43%) expectations, in view of a stronger 2HFY21. Note that our 1HFY21 core PATAMI excludes: (i) forex gain (~RM6.6m) and (ii) FV loss on derivatives (~RM57.1m). DPS of 10.0 sen is as expected.

Results’ highlights. YoY, 1HFY21 core PATAMI rose (+33%) mainly attributable to stronger contribution from Wilmar (+33%) due to stronger refining margins for its feed and industrial products as well as stronger CPO prices for its plantation segment. This was compounded by positive taxation of RM3.5m (vs. tax expense of RM38.8m in 1HFY20). QoQ, 2QFY21 core PATAMI fell (-22%) dragged by lower Wilmar’s earnings (-29%) from weaker food product sales volume (-9%) and sugar division (low sugar crushing season).

Riding on Wilmar. Looking ahead, we see improvements to Wilmar’s 2HFY21 operations – lifted by strong plantation and better soybean crush margins. This should be further boosted by Australia’s on-going sugar crushing season (June to November) and India’s upcoming season (October to March). However, Wilmar’s food products segment is still expected to be impacted by high feedstock prices. Overall, Wilmar’s 2HFY21 earnings should improve which will be reflected in PPB’s bottom line. Meanwhile, PPB’s film segment will remain loss-making due to outlet closures, while higher raw

material costs should continue to impact grains and agribusiness margins.

No changes to FY21-22E earnings.

Maintain MARKET PERFORM with TP of RM19.40 based on joint Sum-of- Parts between PPB and Wilmar. We value PPB (ex-Wilmar) at 18x PER, reflecting -1SD from mean; Wilmar (ex-YKA) at 14x PER (mean); YKA at 27x PER, justified by higher valuations commanded on ChiNext (ChiNext Index Fwd. PER ~37x).

Source: Kenanga Research - 27 Aug 2021