KUALA LUMPUR (Nov 12): Singapore-based Wilmar International Ltd, the major earnings contributor of PPB Group Bhd, posted the highest third quarter profit in five years, but the earnings figures fail to add excitement for the counter over on Bursa Malaysia.

PPB Group share price is unchanged at RM15.26 as at 11.30am with no volume traded.

Kenanga Research has maintained its "Market Perform" rating on PPB Group Bhd with an unchanged target price of RM15 following the latest quarterly earnings results by its 18.3% subsidiary, Wilmar International.

In a note today, the research house said that Wilmar’s core net profit of US$808 million for the nine months ended Sept 30 was“within expectations”.

It said the outlook for Wilmar’s oilseeds and grains (OAG) division had improved significantly. The division registered profit before tax (PBT) of US$101 million in 3Q14 and resulted in a nine-month pre-tax profit of US$47 million versus loss before tax of US$53 million in the first half of the year.

However, the research house was not upbeat over prospects for the palm and laurics (P&L) division, saying it remained unexciting because structural issues of excess refining capacity in the palm downstream industry was likely to persist for at least the next six to 12 months. This is expected to keep the P&L division’s margin smaller against what was achieved last year.

Year-on-year, pre-tax profit for the P&L's division declined 44% to US$370 million for the nine-month period due to excess refining capacity in the palm oil downstream industry.

“Maintain Market Perform. Positive impact from strong earnings recovery in OAG division is likely to be neutralized by thinning margin in P&L division,” it said.

On Singapore-listed Wilmar, TA Securities maintained its "Sell" call on Wilmar with an unchanged target price of S$3.34.

TA Securities said, “Management expects the crushing margin to remain positive in the fourth quarter. The lower commodity prices are positive for the group’s extensive downstream business as it will translate into lower feedstock cost for its consumer products.”

“The major key concern will be the persistent compressed margin in the P&L segment due to the increase in palm oil refinery capacity in Indonesia.”

The research house is maintaining its "sell" call on Wilmar unless it sees a convincing turnaround in the P&L segment and a sharp rally in crude palm oil price.