INVESTMENT HIGHLIGHTS

• 1QFY18 Core Net Income is broadly within our expectation

• Net income declined 44% yoy

• Earnings estimate maintained

• Maintain NEUTRAL with TP of RM19.40

1QFY18 Core Net Income is broadly within our expectation. PPB Group core net income (CNI) of RM198.2m is broadly within our expectation as it makes up 19% of our FY18 full year estimate of RM1.04b. However, the CNI missed consensus estimate as it makes up only 17% of full year forecast. We have excluded forex gain of RM8.5m, write off RM0.6m and forex loss of RM16.6m in our CNI calculation. As expected, no dividend is announced in 1Q.

Net income declined 44% yoy to RM189.5m as Wilmar contribution was lower at RM146m (against 1QFY17 RM279m). PPB own business divisions also registered weaker financial performance.

Earnings estimate maintained. We maintain our FY18 earnings estimate of RM1.04b. We also introduce our FY19 earnings estimate of RM1.07b. Earnings contribution from Wilmar to PPB profit is expected to be the major earnings driver in both FY18 and FY19.

Maintain NEUTRAL with TP of RM19.40. Our Target Price is based on 1.1x Book Value. Positive newsflow surrounding potential Wilmar’s China operations IPO will keep PPB share price supported. However, this is neutralised by high chance of earnings to decline yoy.

Source: MIDF Research - 1 Jun 2018