INVESTMENT HIGHLIGHTS

• FY16 net income exceeds expectations

• FY16 earnings growth is flat

• FY17 earnings estimate increased

• Maintain NEUTRAL with higher TP of RM17.69

FY16 net income exceeds expectations: PPB FY16’s Net Profit of RM1.21b is better than expected as it makes up 121% and 120% of consensus and our earnings forecast, respectively. PPB's Grains and Agribusiness division business performance is better than expected as its PBT managed to grow 3%yoy despite high competition.

FY16 earnings growth is flat. FY16 net profit declined by only 1%yoy to RM1.21b. Better earnings contribution from Wilmar is neutralized by lower earnings from PPB’s “Consumer Products” and “Film Exhibition and Distribution” divisions.

FY17 earnings estimate increased. We have increased FY17 earnings estimate by 4% to RM945m to reflect higher earnings estimate from PPB’s Grains and Agribusiness (G&A) division. We have also introduced FY18 net income estimate of RM947m.

Maintain NEUTRAL with higher TP of RM17.69. Our Target Price is higher due to rollover of valuation to FY16 book value. Valuation method of 1.0x Price To Book ratio is unchanged. Despite the strong FY16 result, PPB earnings may have peaked in the near term as Wilmar’s sugar division should incur seasonal loss in 1HFY17 before recovering in the 2HFY17.

Source: MIDF Research - 1 Mar 2017