KUALA LUMPUR (Nov 14): PPB Group Bhd is expected to deliver ‘decent’ financial results for the third quarter ended Sept 30, 2017 (3QFY17) on Nov 23, said MIDF Research.

In a note today, MIDF Research said this was in line with the recent performance of its Singapore-listed subsidiary Wilmar International Ltd.

“Historically, Wilmar's contribution to PPB profit is in the range of 60% to 70% and we expect this trend to remain in financial year ending Dec 31, 2017 (FY17) and FY18.

“We believe that PPB’s 3QFY17 earnings should be weaker on-year, but stronger on-quarter. This is in line with Wilmar’s 3QFY17 core net profit (CNP) of US$324 million, which declined 16% year-on-year but surged 768% quarter on quarter,” MIDF Research said.

In a separate note, TA Securities said Wilmar’s core net profit for the 9-month period ended Sept 30 (9MFY17) surged 74% on-year to US$673.6 million, while revenue climbed 9.7% on-year to US$32.3 billion, amid higher commodity prices and production volume. 

Pre-tax profit of Wilmar’s oilseeds and grains segment more than doubled to US$528.5 million with higher volume processed, higher sales volume and better margins, while joint venture contributions rose 58.9% to US$116.5 million.

However, its sugar segment’s loss before tax widened to US$66.1 million, from US$10.5 million in 9MFY16. “The loss was mainly due to seasonal plant maintenance activities in 1HFY17, as well as weaker performance in the merchandising and refining businesses. 

“Note that the sugar harvesting season will only commence in 2HFY17,” TA Securities said.

Similarly, Wilmar’s tropical oils segment posted a 36.4% lower pre-tax profit at US$321.2 million, amid lower downstream margins.

TA Securities has maintained its ‘Hold’ call on Wilmar, with a lower target price (TP) at S$3.63, from S$3.72 earlier, following the earnings adjustments. 

“Despite TP downgrade, we believe the proposed IPO exercise for its China operations in 2019 will gain some interest from investors,” TA Securities added.

Meanwhile, MIDF Research has maintained its ‘Neutral’ call on PPB, with a TP of RM17.69, on par with its book value. 

It expects PPB’s 9MFY17 to be higher on-year, supported by its strong performance in the first half of the year.

“Despite our bullish view on palm oil prices, PPB exposure to pure upstream plantation is diversified through Wilmar, hence we expect it to benefit less than other plantation companies,” MIDF Research said.