Three segments set to drive PPB earnings

PETALING JAYA: PPB Group Bhd earnings growth will mainly be driven by the grains and agribusiness as well as consumer products segments and cinema operations this year.

According to UOB Kay Hian, PPB’s associate company Wilmar International Ltd should have steady contributions from all of its three divisions – tropical oils, oilseeds and grains and sugar – in 2017 on the back of higher sales volume and steady prices.

“We are expecting earnings growth of 36% for Wilmar in 2017 and about 60% to 70% of PPB’s earnings to come from Wilmar,” said the research house, which has maintained a “hold” call on the company, in its report.

UOB Kay Hian said although Malaysia’s consumer spending is expected to remain lacklustre in the near term due to the economic uncertainty, PPB’s solid business model is expected to aid its earnings growth.

“The grains and agribusiness as well as consumer products segments are basic necessities.

“Demand is expected to be resilient despite the challenging market conditions, and performances of these businesses are supported by PPB’s established leading position in the market.

“Moreover, we understand that cinema operations will also continue to post a good set of results in 2017 as movies are one of the most affordable forms of entertainment in Malaysia,” it said.

It added that management indicated there is no plan to sell off or de-merge its cinema operations for now.

Meanwhile, Kenanga Research said that in the property segment, sales for the Johor Southern Marina project remained relatively weak although management noted a recent pick-up in inquiries, especially from foreign buyers.

“The company also aims to launch its Taman Megah in Petaling Jaya redevelopment project with a gross development value of RM500mil, which should improve segment sales in the next one to two years.

“Other upcoming projects include the renovation of New World Park (Penang) and a link bridge to the upcoming MRT station at Cheras Leisure Mall,” said Kenanga Research, which has maintained “market perform” call on PPB.

For the engineering segment, Kenanga Research saw some order-book improvement to RM160mil as at end of 2016, from RM132mil in middle of 2016, with management being more optimistic on its outlook as it is tendering around RM600mil worth of water and sewerage projects.

On expansion, UOB Kay Hian said PPB planned to spend RM401mil of capital expenditure (capex) in next two to three years.

“PPB’s capex for cinema operations is the highest among that for other segments, accounting for more than half of total capex.

“Cinema operations will continue to expand across Malaysia, Cambodia and Vietnam,” it said.

UOB Kay Hian said PPB is also looking to increase wheat flour milling capacities in Malaysia and Vietnam as well as raise its investment in China.