PPB’s profit to be strong in 1HFY18

KOTA KINABALU: PPB Group Bhd’s (PPB) profit for the first half of financial year 2018 (1HFY18) has been projected by analysts to be strong on the back of associate Wilmar International Ltd’s (Wilmar) earnings contributions.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) expected PPB profit to be strong in 1HFY18 as contribution from Wilmar accounted for 62 per cent to 75 per cent of total earnings in the past five years.

“However, the uncertainty of whether the trade dispute between US and China should limit PPB share price upside,” MIDF Research commented in its latest report on the group.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research) believed Wilmar’s earnings in the second half of 2018 (2H18) would improve along with the gradual recovery in commodity prices.

Kenanga Research noted that recent developments in the palm oil industry are supportive of crude palm oil (CPO) prices - India’s recent move to raise import taxes on other vegetable oils and Indonesia’s push to make biodiesel (B20) compulsory for all vehicles and heavy machinery by next month.

“Earnings in the Sugar segment should also improve in 2H18 with the commencement of crushing season in June,” the research arm said.

“Nevertheless, we note that a drawn-out trade spat between China and US could adversely affect crush margins in the O&G segment due to lower capacity utilisation.”

All in, Kenanga Research reiterated its ‘outperform’ call on PPB with an unchanged target price of RM18.60 per share.

The research arm highlighted that this was on the back of PPB’s own earnings growth from expansions across the group’s key segments and the upcoming listing of Wilmar’s China business, targeted for FY19-20.