Clear horizons ahead for cash strong PPB Group
KUCHING: Analysts remain sanguine on the long- term prospects of PPB Group Bhd ( PPB) after a recent analyst briefing.
Acocording to MIDF Amanah Investment Bank Bhd ( MIDF Research), this was due to long term stable earnings prospect seen from Wilmar Ltd, improved earnings from PPB’s grains and agribusiness division as well as its superior balance sheet with net cash of RM684 million.
“Wi lmar ’ s cont r ibut ion increased 16 per cent year on year (y- o-y) to RM376 million. We gather that Wilmar contribution to PPB’s profit before tax increased 16 per cent y- o-y to RM376 million in the first half of financial year 2018 (1HFY18),” it said in a report yesterday.
This was in line with improved 1HFY18 earnings at Wilmar, it added, whereby net profit grew by 30 per cent to US$ 520 million or about RM2.15 billion.
Recall that Wilmar oilseeds and grains segment’s profit before tax jumped by 73 per cent y- o-y to US$ 463 million due to higher crushing volumes and margins.
The profit before tac for Wilmar’s tropical oils segment improved 20 per cent y- o-y to US$ 257 million due to better performance from midstream and downstream businesses.
Meanwhile, its grains and agribusiness division performed well with earnings before interest and tax increasing by 30 per cent y- o-y to RM73 million.
This is caused by a six per cent increase in revenue to RM1.54 billion due to higher sales volume from all flour mills.
Margin has also improved due to lower raw material costs.
“It also saw weaker earnings from cinema and consumer division. Its film exhibition and distribution’s earnings before interest and tax declined 28 per cent y- o-y to RM26 million due to losses from the film distribution business as movie titles released were weaker compared to previous year,” MIDF Research said.
“For consumer products, earnings before interest and tax declined 46 per cent y- o-y to RM10 million. The lower profit is due to RM8 million one off gain in 1HFY17 related to sale of land and building,” it added. “Excluding this, the earnings decline was about nine per cent y- o-y.”
The firm thus maintained its neutral stance on PPB Group with a higher target price of RM17.63 per share.
“We maintain our FY18/FY19 earnings estimates of RM912 mil lion and RM1.03 bil lion respectively. The positive newsflow surrounding potential Wilmar’s China operations IPO will keep PPB share price supported.”