PUC Bhd embarked on a digital transformation when Mr. Cheong Chia Chou took the helm in May 2017. It has since ventured into: (i) e-money services, (ii) e-commerce and (iii) digital imaging through strategic acquisitions and partnerships, and the aim is to integrate these new initiatives under a super app (along the lines of Grab, Gojek). Near term, management expects funding of about RM100m to execute this. PUC’s traditional businesses are advertising/media, technology, financial services (payment terminals) and solar energy.

Microfinancing Platform

PUC’s wholly-owned subsidiary, Wealth Pursuit SB (WPSB), recently partnered with the Malaysian Workers Foundation (YAPEM) on a micro financing programme/platform for two years. Chiyo (a regional asset management firm) and other potential local financial institutions will be the source of funding for WPSB to undertake this project with YAPEM.

Riding the E-commerce Wave With 11street Malaysia

11street, the 3rd largest online marketplace in Malaysia (Fig 3), is operated by Celcom Planet SB, which is co-owned by SK Planet Global (44.7%), Axiata Digital (43.0%) and PUC (12.3%). Despite its relatively small stake, PUC has been given: (i) management control and (ii) preferred provider status for marketing, technology and payment gateway services. LBITDA from 11street narrowed to RM64m in 2018 vs. -RM118m in 2017.

Integrating Digital Ecosystem Into the Presto App

Presto is a home-grown super app that consolidates: (i) online shopping, (ii) cashless payments and (iii) other e-services onto one platform. It distinguishes itself from peers by promoting: (i) attractive cashback rewards and (ii) Online-to-Offline (O2O) commerce.

Management Expects Near-term Lift in Earnings From Pictureworks

Acquisition of the remaining 67% stake in Pictureworks, a theme park imagery provider, is expected to be completed by 2Q19 pending shareholders’ approval. Its existing 33% stake in Pictureworks contributed about 57% to its 2018 PBT.

Valuation Above That of Local Media Peers

PUC’s advertising/media segment contributed c.66% of its 2018 revenue and its 2018 PER of 32x is above the average of 11x of the local media companies (exc. MPR MK, RM0.48, Sell) under our coverage. In the ecommerce space, Alibaba (BABA US, USD182.45, Buy [1] – covered by Daiwa) trades at a 2018 PER of 39x.

Source: Affin Hwang Research - 2 Apr 2019