Journey to Wealth
PPB Group - Hurt by Wilmar again Hold
- Maintain HOLD on PPB Group Bhd, with a lower fair value of RM15.90/share versus RM17.25/share previously. Our fair value of RM15.90/share is based on a PE of 18x on FY13F EPS.
- PPB's 18%-owned associate, Wilmar International, is currently trading at FY13F PE of 11.4x (based on consensus estimates) compared with PPB's 15.8x.
- Not surprisingly, PPB's 1HFY12 results fell short of our expectations and consensus estimates due to Wilmar's weak results.
- PPB's share of profits in associate declined 52% from RM446.3mil in 1HFY11 to RM214.4mil in 1HFY12. Recall that Wilmar's core net profit shrank 51.5% from US$779.8mil in 1HFY11 to US$378mil in 1HFY12 due to losses in the oilseeds and grains and sugar milling divisions.
- A positive note is the depreciation of the RM against the US$. US$ appreciated 1.8% from an average of US$1.00/RM3.0324 in 1HFY11 to US$1.00/RM3.0878 in 1HFY12. Wilmar's earnings are reported in US$. Hence, PPB benefits from a weaker RM when Wilmar's earnings are translated into RM.
- PPB's flour division recorded an 8.2% increase in EBIT from RM61mil in 1HFY11 to RM66mil in 1HFY12. We believe that this was due to the fall in wheat costs. We reckon that improved performance from the flour division helped in compensating for losses in the bread subdivision.
- EBIT margin of the flour division inched down marginally from 8% in 1HFY11 to 7% in 1HFY12.
- According to Bloomberg, the price of low protein soft red wheat fell 23.6% from an average of US$8.77/bushel in 1HFY11 to US$6.70 1/8/bushel in 1HFY12.
- To improve market share, Massimo bread is still being sold at the promotional price of RM2.50/400 gm loaf after its launch in July last year.
- Massimo had also launched a new bread product, i.e. whole wheat loaf in June 2012. The selling price of whole wheat bread is RM3.50 for a 420 gram loaf.
- EBIT of the cinema division declined 8.5% YoY to RM19.6mil in 1HFY12 on the back of higher distribution costs.
Source: AmeSecurities
Related Stocks
| Chart | Stock Name | Last | Change | Volume |
|---|
More articles on Journey to Wealth
Ekovest: No plan to launch another offer for Iskandar Waterfront City
Created by kiasutrader | Mar 29, 2018
Kenanga Research - On our Portfolio - Parliament dissolution around the corner?
Created by kiasutrader | Mar 25, 2013
Plantation Sector - Proposed accounting standard scrapped OVERWEIGHT
Created by kiasutrader | Mar 25, 2013
Pavilion Reit - Limited upside, earnings upside have been priced in HOLD
Created by kiasutrader | Mar 25, 2013
Discussions
Be the first to like this. Showing 0 of 0 comments
Post a Comment
Featured Posts
Latest Videos
Apps
Top Articles
2
3
4
save malaysia!
Visa-free travel to China extended for Malaysians to 30 days
5
6
Koon Yew Yin's Blog
CPO price is rising rapidly as shown by chart below - Koon Yew Yin
7
Axcapital's investment blog
KAB - Executing its way to a record quarter. Could more Petronas contracts be coming?
8
BFM Podcast
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
