INVESTMENT HIGHLIGHTS

• 9MFY18 Net Income is above expectations

• 9MFY18 revenue improved 6% yoy

• 9MFY18 earnings improved 3% yoy

• Earnings estimate increased

• Maintain NEUTRAL with TP of RM17.63

9MFY18 Net Income is above expectations. PPB Group 9MFY18 net income of RM854m is above our expectation as it makes up 94%/85% of our/consensus expectations. The better than expected earnings could be attributed to stronger than expected earnings from Wilmar and PPB’s “Film Exhibition & Distribution” division. As expected, no dividend is announced in the third quarter of the financial year.

9MFY18 revenue improved 6% yoy to RM3.36b due to higher revenue in the "grains and agribusiness", "film exhibition and distribution", "enviromental engineering" and "property" segment.

9MFY18 earnings improved 3% yoy to RM854m as Wilmar contribution was higher at RM682m (against 9MFY17 RM614m). Among PPB own businesses, "Film Exhibition & Distribution", "Enviromental Engineering" and "Property" segments registered better earnings yoy.

Earnings estimate increased. We have increased our FY18 earnings estimate by 11% to RM1.01b. We also increase our FY19 earnings estimate by 6% to RM1.09b. Key changes are: i) Better margin assumed for Wilmar’s Tropical Oils segment due to cheaper feedstock price and ii) Higher sales volume for PPB’s “Film Exhibition & Distribution” division.

Maintain NEUTRAL with TP of RM17.63. Despite the increase in our earnings estimates, our Target Price is unchanged as it is based PriceTo-Book valuation. We are using 1.1x Book Value. The positive newsflow surrounding potential Wilmar’s China operations IPO will keep PPB share price supported.

Source: MIDF Research - 28 Nov 2018