• PPB’s 2020 core net profit of RM1.3bn (+14.4% yoy) came in within our expectations. Higher profits were seen at grains & agribusiness, consumer products, environmental engineering and Wilmar
• PPB declared a higher DPS of 38 sen, bringing its 2020 total DPS to 46 sen (2019: 31 sen), higher than our earlier expectations
• No changes made to our 2021-22E earnings forecasts. Our DCF-derived TP is unchanged at RM19.70 and we maintain our HOLD rating on PPB

2020 Core Net Profit at RM1.3bn – Within Our Expectations

PPB Group Berhad (PPB) reported a lower 2020 revenue of RM4.2bn, down 10.5% yoy, mainly attributable to a decline in contribution from its grains & agribusiness, film exhibition & distribution and environmental engineering businesses but partially offset by an increase in revenue at the consumer products and property divisions. However, the group’s 2020 PBT increased by 11.7% yoy to RM1.4bn, mainly due to higher profit contribution from: 1) grains & agribusiness (due to lower raw material costs and higher contribution from China associates), 2) consumer products (improved performance at bakery division), 3) environmental engineering (2019 included an impairment at an overseas JV) and 4) other operations (due to higher profit contribution from Wilmar). The film exhibition & distribution division was loss-making in 2020 due to the Movement Control Order (MCO) that required the closure of cinemas, and low admissions on the deferment of movie releases by major distributors coupled with lower mall-related income. After adjusting for one-off items, PPB’s 2020 core net profit increased by 14.4% yoy to RM1.3bn, which came in within our expectation.

Weaker Qoq Earnings Mainly Due to Lower Wilmar Contribution

PPB’s 4Q20 revenue stood at RM1.1bn, up 9.3% qoq, due to an increase in contribution across all segments except film exhibition and distribution. Meanwhile, PBT declined by 6.9% qoq to RM400.1m, due to lower profits from Wilmar, grains and agribusiness, environmental engineering and wider losses from film exhibition & distribution. Excluding one-off items, PPB’s core net profit declined by 3% qoq to RM417.7m in 4Q20.

Maintain HOLD Rating on PPB With Unchanged TP of RM19.70

We make no changes to our 2021-22E core earnings forecasts and introduce our 2023E forecasts. We expect earnings to continue to improve from 2021 onwards as the global economy progressively re-opens and demand for consumer products improves. Our DCF-derived target price is unchanged at RM19.70 and we maintain our HOLD rating on PPB.

Source: Affin Hwang Research - 26 Feb 2021