Investment Highlights

• We maintain BUY on PPB Group with an unchanged fair value of RM19.30/share. Our fair value for PPB is based on FY23F PE of 15x. We ascribe a 3-star ESG rating to PPB. PPB is currently trading at an undemanding FY23F PE of 13x vs. its 5-year average of 21x.

• PPB held a virtual briefing last Tuesday following the release of its 1HFY22 results. Here are the key takeaways:
  • PPB is cautiously optimistic on its outlook for 2HFY22. Although there are headwinds from rising operational costs and labour shortage, raw material prices have stabilised and some businesses such as film exhibition have returned to pre-pandemic levels.
  • The grains and agribusiness division benefited from higher selling prices and fair value gains of RM46mil in 2QFY22. The division raised the selling price of its flour products by 15% in June 2022. We forecast an EBIT of RM78mil for the grains and agribusiness in FY22E (1HFY22: RM77mil loss).
  • The film exhibition and distribution division’s outlook is positive. We estimate an EBIT of RM35mil for the division in FY22E (1HFY22: RM7mil loss). Cinema attendances have exceeded pre-pandemic levels.
  • The division will be opening 42 screens at 4 locations in 2HFY22. The locations are The Spring Mall (Kuching), Bintulu, Sunway Iskandar Johor, Bukit Bintang City Centre and IOI City Mall, Putrajaya. Incidentally, the division raised prices of movie tickets by 5%-7% in May.
  • The consumer products division will be reviewing the prices of its Massimo bread products soon. The last price hike took place in January 2022. The division raised prices of some of its bread products by 8%-10% in January. Recently, Gardenia announced that it would be increasing the prices of some of its bread products on 1 September.
• We like PPB as it is a beneficiary of lower soft commodity prices. The flour milling segment is expected to enjoy lower wheat prices while the feed milling unit is anticipated to benefit from lower soybean and corn prices.

Source: AmInvest Research - 1 Sept 2022