• Expect PPB’s 2QFY17 result to be lower yoy and qoq.

• Wilmar 1HFY17 earnings is within expectation

• Wilmar’s 1HFY17 CNP of USD350m is better yoy

• Maintain PPB FY17 earnings estimate

• Maintain NEUTRAL with TP of RM17.69

Expect PPB’s 2QFY17 result to be lower yoy and qoq. PPB Group Berhad (PPB) is expected to release its 2QFY17 financial result on 24- August. We believe that the 2QFY17 earnings should be weaker yoy and qoq. This is in line with Wilmar 2QFY17 Core Net Profit (CNP) of USD37m which has declined yoy and qoq. Having said that, its 1HFY17 should remain higher against 1HFY16 due to strong 1QFY17 result.

Wilmar 1HFY17 earnings is within expectation. Although the Core Net Profit makes up 37% of our estimate, we deem the result as within expectation. We are expecting Tropical Oils division earnings to improve in the 2H17 as FFB production yields improve and higher margins from downstream operations. Dividend of SGD 3 cents was announced and this is within expectation.

Wilmar’s 1HFY17 CNP of USD350m is better yoy. This is compared against 1HFY16’s CNP USD2m due to strong earnings growth in the Oilseeds and Grains segment. OAG segment registered PBT of USD275m (against last year's USD175m Loss Before Tax) due to higher crush volume and positive crush margins. However, Tropical Oils segment PBT declined 29% yoy to USD238m due to challenging operating conditions faced by the merchandising and processing businesses.

Maintain PPB FY17 earnings estimate. We maintain our FY17 CNP estimate of RM945m. We also maintain our FY18 CNP estimate of RM947m. Historically, Wilmar contribution to PPB profit is around 60% to 70% and we expect this trend to remain in FY17 and FY18.

Maintain NEUTRAL with TP of RM17.69. Our Target Price is based on 1.0x Book Value.

Source: MIDF Research - 11 Aug 2017