KEY INVESTMENT HIGHLIGHTS

• Core business posted mixed results
• Wilmar recorded mixed performance
• Earnings forecast; downgrade
• Maintain NEUTRAL with a revised TP of RM14.47

Recovery in main business. 1HFY24's core PATMI missed our and consensus forecast, making up 43.2% and 41.6% respectively, of full year estimates. Bottom-line was only RM594.2m attributed to the weakness of its core business namely consumer products, film exhibition and the Wilmar contribution. Broadly, operating profit was narrowed to RM189.5m (-19.1%yoy) with a flattish margin of +7.3% (-0.5 pts) recorded.

Grains and agribusiness. During the quarter, the segment PBT relatively unchanged at RM68.4m (+0.3%yoy), owing to sticky refining margins. However, topline fell by -15.5%yoy mainly due to absence of revenue contribution from the divested Indonesia flour operations.

Consumer products. While topline surged by double digit during the quarter which benefited from Raya festive seasons, profitability on the other hand recorded a marginal loss of -RM0.042m, owing to the higher trade promotion and operating costs.

Film exhibition and distribution. The profitability reversed to black, on extended margins by 1.2pts to 7.4%, following narrowed operating costs due to cinema closure.

Earnings estimates. We revised our earnings estimates for FY24E-26F by -5.0%/-7.3%/-13.6% to RM.31b/RM1.37b/RM1.42b, as we tweaked the Wilmar contribution by -10.3%/-13.1%/-14.5% lower. The adjustments were made due weaker estate activity seen in Plantation & Sugar business, particularly when the FFB, CPO and PK production, FFB Yield and OER were down by -6%/-10%/-10%/-7% and -2% respectively, due to prolonged dry weather (El-Nino in Indonesia and Sabah area) conditions, which resulted squeezed in margins due to fixed input cost in cost production. In 1HFY24, this segment revenue and profit were down by double digit to USD1.32b (-30%ytd) and USD53.9m (- 14%ytd), respectively. Additionally, we also toned-down Wilmar's earnings assumption for Food, Feed and Industrial products over the next 2 years, after taking into account of slower growth of China economy that have seen indirectly hit the F&B and HORECA market recently.

Maintain NEUTRAL. We are maintaining our NEUTRAL call with a revised TP of RM14.47 based on PER of 15x (nearly 5y historical average mean) by pegging FY25F EPS of 96.4sen.

Source: MIDF Research - 30 Aug 2024