Investment Highlights

• We maintain HOLD on PPB Group with an unchanged fair value of RM19.60/share. Our fair value is based on FY22F PE of 18.0x and a 3% premium for a 4-star ESG rating.

• PPB held a virtual briefing yesterday. Here are the key takeaways.

• PPB’s earnings are expected to improve in 2HFY21 after an unexciting 2QFY21. PPB is envisaged to manage the increase in the cost of raw materials better in 2HFY21. In addition, there is a possibility that cinemas may be allowed to resume operations in October. Also, we think that the brief decline in wheat prices in June and July may have allowed the group to procure supplies for the flour division.

• PPB is hopeful that there would not be any plant shutdown in the grains and agribusiness division in 2HFY21 as most of the workers – more than 90% – have already been vaccinated. At the group level, over 80% of PPB’s workforce have already been vaccinated.

• The consumer products division is seeing healthy sales for staple items such as bread, frozen food and canned products. However, demand for products sold to the HORECA segment is still soft. Also unlike last year, there was no panic buying of food products this year.

• Currently, most of the consumer products are sold in Malaysia. In the long term, PPB plans to export consumer products to markets such as Indonesia and Brunei.

• GSC (Golden Screen Cinemas) is constantly engaging with the authorities on the reopening of cinemas. GSC has proposed to allow only cinema patrons who are fully vaccinated. Furthermore, cinema patrons must wear masks the whole time unless they are eating or drinking. About 98% of GSC’s employees will be fully vaccinated by October or November 2021. Blockbuster movies, which are supposed to be released in 4QFY21, include Dune and Matrix 4.

• The proposed acquisition of MBO’s cinema assets will be completed in September 2021. After that, GSC will take a month to rebrand the MBO cinemas as GSC. Major renovation and refurbishments of the former MBO cinemas will only be carried out later.

Source: AmInvest Research - 3 Sept 2021