9MFY21 core PATAMI of RM1,024.1m (+14% YoY) is within both our (75%) and consensus’ (74%) expectations. We expect Wilmar to end the year strong with sustained refining margins, crush margin improvements and plantation strength. This will overshadow PPB’s weak film segment and muted grains and agribusiness margins (on high raw material costs). Trim FY22E earnings by 2%. Maintain MP with SoP-derived TP of RM18.90 (from RM19.40).

Within expectations. 3QFY21 core PATAMI of RM398.9m (+46% QoQ; -7% YoY), brought 9MFY21 core PATAMI to RM1,024.1m (+14% YoY), which is within both our (75%) and consensus’ (74%) expectations. Note that our 9MFY21 core PATAMI excludes: (i) forex gain (~RM5.2m) and (ii) FV loss on derivatives (~RM53.3m). Absence of DPS is as expected.

Results’ highlights. YoY, 9MFY21 core PATAMI rose (+14%) mainly attributable to stronger contribution from Wilmar (+20%) due to stronger refining margins for its feed and industrial products, better plantation results on stronger CPO prices and overall food products sales improvement (+6%). This was compounded by lower taxation of RM3.1m (vs. RM46.9m in 9MFY21). QoQ, 3QFY21 core PATAMI surged (+46%) from higher Wilmar’s earnings (+77%) on better food product sales volume (+18%) and stronger refining margins for its feed and industrial products.

Still riding on Wilmar. Overall, Wilmar’s 2HFY21 earnings should improve which will be reflected in PPB’s bottom-line – lifted by strong plantation, better feed and industrial products refining margins as well as soybean crush margin improvements. 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. Meanwhile, PPB’s film segment recovery will not be swift, while higher raw material costs should continue to impact grains and agribusiness margins.

Trim FY22E earnings by 2% on foreign source income tax.

Maintain MARKET PERFORM with a lower TP of RM18.90 (from RM19.40) based on joint FY22E 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 26x PER (from 27x PER) due to heightened regulatory risk in China.

Source: Kenanga Research - 1 Dec 2021