KUALA LUMPUR: Kenanga research said Wilmar International's 2Q19 core net profit came in broadly within expectations at US$111mil, which represents 40% and 38% of its and consensus full-year estimates respectively.
The research house maintained its underperform call on PPB Group Bhd with an unchanged target price of RM16.
In a note, Kenanga said the second half of the year is usually a stronger earnings period for Wilmar with the commencement of Australia's sugar crushing season.
"1H profits in the past 5 years constituted 31-42% of full-year earnings (except for 1H16, which posted extremely poor performance amid highly volatile soybeans market)," it said.
1H19 fresh fruit bunch also came broadly in line with estimates at 4.3 million metric tonnes with production expected to increase in 2H.
The group's tropical oils segment saw the biggest improvement in 1H19 core net profit to US$453mil, which was a 10% increase year-on-year due to higher sales volume and cheaper feedstock.
The oilseeds and grains segment recorded a 68% drop in pre-tax profit due to lower soybean crush margins amid the Africa swine fever outbreak in China and marginally lower sales volume.
"We see a potential recovery in the soybeans crush margins in 2H19 as the adverse effect of the African swine fever outbreak subsides, boding well for the O&G segment.
"In the TO segment, earnings should remain stable as we gather that the group has already locked in feedstock at lower prices, keeping processing margins in check," said Kenanga.