Investment Highlights

• We maintain BUY on PPB Group with an unchanged fair value of RM19.40/share, based on a FY23F PE of 15x. The PE of 15x is at a 5% premium to PPB’s 2-year average of 14x. We ascribe a 3-star ESG rating to PPB.

• PPB’s FY22 net profit was in line with our forecast and consensus estimates. The group has declared a final gross DPS of 28 sen, which brings total gross DPS to 40 sen for FY22. This translates into a yield of 2.3%. We forecast a lower gross DPS of 33 sen for FY23F, which implies a yield of 1.9%.

• PPB’s net profit surged by 46.8% to RM2.2bil as 18.6%- owned Wilmar International benefited from higher palm refining and soybean crushing margins. Share of net profit in associates (mainly Wilmar International) climbed by 38.4% to RM2.2bil in FY22 from RM1.6bil in FY21.

• Grains and agribusiness division swung into the black with a pre-tax profit of RM0.1mil in FY22 vs FY21 pre-tax loss of RM21.3mil. We believe that the improvement in earnings was driven by higher selling prices and lower cost of wheat in 2HFY22.

• The film and exhibition division recorded a smaller pre-tax loss of RM17.3mil in FY22 vs. RM105.3mil in FY21. The unit was affected by an impairment of RM27mil on its associate in Vietnam. Excluding the impairment, the film and exhibition division would have recorded a pre-tax profit of RM10mil in FY22 on the back of higher cinema patronage and spending.

• Pre-tax profit of the consumer products division rose to RM35.6mil in FY22 from RM8.7mil in FY21 in the absence of Covid-related expenses. Also, the division benefited from higher selling prices and demand for bakery products in FY22.

• Comparing 4QFY22 against 1QFY22, PPB’s net profit fell by 47.1% to RM415.5mil on lower contribution from Wilmar. On a positive note, 4QFY22 pre-tax profit of the grains and agribusiness division rose by 39.9% QoQ to RM44.6mil, underpinned by lower wheat costs.

• PPB is currently trading at an attractive FY23F PE of 14x, vs its 3-year peak of 20x.

Source: AmInvest Research - 1 Mar 2023