PBB to gain from Wilmar’s earnings

KUCHING: With PBB Group Bhd (PPB) set to release its financial results on May 25, analysts are optimistic the palm oil giant will announce strong earnings boosted by its subsidiary, Wilmar International Ltd (Wilmar).

MIDF Amanah Investment Bank Bhd (MIDF Research) believe that PPB’s earnings should be strong following its subsidiary Wilmar reporting core net profit (CNP) of US$313 million for the first quarter of financial year 2017 (1QFY17) yesterday.

“Although it makes up 33 per cent of our estimate, we deem the result as within expectation as we are expecting CPO price to moderate in the coming quarters due to supply increase in the market,” it said in a report yesterday.

“Hence, its Tropical Oils segment profit should moderate in the coming quarters. No dividend is announced in the first quarter and this is within expectation.”

To note, Wilmar’s 1QFY17 profit before tax grew by 45 per cent year on year ( y- o- y) to US$ 467 million due to better profit from the Oilseeds and Grains and Tropical Oils segments.

Tropical Oils segment’s profit before tax went up 20 per cent y-o-y to US$179 million as it benefited from higher CPO price and volume.

“We maintain our FY17 core net profit estimate of RM945 million,” MIDF Research said, adding that it also maintained its FY18 estimates of RM947 million.

“Historically, Wilmar’s contribution to PPB profit is around 60 to 70 per cent and we expect this trend to remain at least in FY17 and FY18.”

Kenanga Investment Bank Bhd (Kenanga Research) in a separate note observed that Wilmar’s sugar segment saw loss before tax of US$34 million in line with seasonal maintenance of Australian mills.

Its Others segment also saw a 4.7 times jump on better shipping and fertiliser earnings and investment gains.

On that note, it saw that Wilmar could see Chinese restructuring on the cards.

“Wilmar also announced that it is “carrying out an internal restructuring of its China operations with the possibility of a separate listing”. We gather that China is the largest single revenue source for Wilmar at US$19.98 billion or 48 per cent of FY16 revenue,” it said.

“At a profit before tax level, assuming the bulk of its Oilseed and Grains and Consumer segment revenues are derived from China, we estimate that China makes up 27 per cent of profit before tax.

“As such, we believe the restructuring will have a significant impact on the group, and its listing could well be positive for shareholder PPB with its 18.6 per cent stake, for example, if Wilmar rewards its shareholders with dividends from the listing.”