KUALA LUMPUR: MIDF Research expects PPB Group Bhd’s core net profit for the first half to June 30, to grow between 20% and 25% year-on-year in line with Wilmar International Ltd’s 21% core net profit growth.
The research house said on Thursday Wilmar earnings contribution to PPB Group at the pre-tax profit was 68% although PPB holds only 18.3% stake in Wilmar.
MIDF is leaving PBB’s earnings forecast for both FY15 and FY16 unchanged.
“Also intact is our target price of RM17.80 which is based on 21.6x forward PE on FY16 forecast earnings reflecting +0.5SD valuation. We continue to like PPB as we expect its first half 2015 earnings growth to outperform all other index-linked planters. PPB is also poised to benefit from higher US dollar rate as Wilmar earnings is reported in US dollar,” it said.
Wilmar first half’s core net profit of US$457mil was within expectation accounting for 38% of MIDF’s estimate of US$1.19bil. It also makes up 36% of consensus estimate of US$1.26bil.
Note that Wilmar’s first half result usually makes up only, on average, 35% of full year core net profit in the past three years. This is due to the seasonal impact of its sugar division in Australia which become profitable only in second half in line with the sugar crushing season in Australia.
Oilseeds and Grains segment performed well with pre-tax profit increased by 412% year-on-year to US$227mil.
“We gather that this is caused by improved China crush margins and higher volume crushed. However, the magnitude of earnings growth was limited by lower pre-tax profit in tropical oils segment with pre-tax profit declining 32% year-on-year to US$151mil,” MIDF said.
PPB was down 10 sen to RM15.08.
