INVESTMENT HIGHLIGHTS

• Wilmar 1HFY18 earnings is within expectation

• 1HFY18 core net profit increased 63%yoy

• Wilmar China soybean crushing operation will be affected if US-China trade dispute persist in the long term

• Maintain PPB earnings estimates

• Maintain NEUTRAL with TP of RM16.16

Wilmar 1HFY18 earnings is within expectation. Wilmar’s 1HFY18 CNP of USD535m is within expectation as it makes up 47% of both ours and consensus core earnings forecast. As expected, dividend of SGD 3.5 cents was announced.

1HFY18 core net profit increased 63%yoy. Oilseeds & Grains (OAG) segment PBT jumped 73%yoy to USD463m due to higher crushing volumes and margins, and a good performance from the Consumer Products business. Tropical Oils segment PBT improved 20%yoy to USD257m due to better performance from midstream and downstream businesses.

Wilmar China soybean crushing operation will be affected if USChina trade dispute persist in the long term. Wilmar mentioned that “the trade tensions between the US and China has improved crush margins in the short term”. However, the Company cautioned that “a prolonged dispute between the two countries will have a negative impact on crush margins due to lower plant utilisation”.

Maintain PPB earnings estimates. FY18 Core Net Profit estimate is maintained at RM912m. We also keep our FY19 CNP estimate of RM1.03b unchanged.

Maintain NEUTRAL with TP of RM16.16. Our Target Price is based on Price To Book value of 1.1x. We do expect PPB profit to be strong in 1HFY18 as contribution from Wilmar accounted for 62% to 75% of total earnings in the past 5 years. However, the uncertainty of whether the trade dispute between US and China should limit PPB share price upside.

Source: MIDF Research - 14 Aug 2018