We attended PPB's FY15 Analysts' Briefing, which was well attended by about 40 participants. Generally, we returned with our overall NEUTRAL outlook intact as positive prospect in the Film and Grains segments is seen to be offset by a weaker Property outlook amid soft consumer confidence. We are also lukewarm on Wilmar as the positive Tropical Oils outlook could be offset by weak demand in China and risk of weaker Chinese Yuan (CNY). We maintain our MARKET PERFORM call on PPB with an unchanged TP of RM16.92 based on Fwd. PER of 19.5x on FY16E EPS of 86.7 sen.

Positive on Film segment. We gather that new cinema openings proceeded as planned in FY15, with five new outlets in Malaysia. Looking ahead, although no new cinemas will be opened in FY16, seven new screens will be added in their Mid Valley and Summit cinemas. Further ahead, GSC targets to open another seven cinemas in FY17. Overseas expansion is on track with the Cambodian outlet targeted to open in 3Q16, while its Vietnamese JV will open at six new locations in FY16. Hence we are positive on the Film division’s prospect with 21% growth in locations by FY17.

Grains segment to see stable wheat prices. Management expects wheat prices to remain stable despite higher global production forecast (+7%). With the recent Johor expansion of 500 tons per day (TPD) capacity, we think the Grains segment’s contribution should improve in 2016, although risks remain with higher competition in Indonesia.

Property slowdown continues. In line with other Johor-centric property players, PPB was affected by the subdued market sentiment in its Puteri Harbour project, which saw an initial booking rate of about 50%, which declined to an actual take-up of about 40% due to tight lending policy. Despite the challenging outlook, we gather that PPB targets to launch another two projects by end-2016, which should contribute to sales.

 Wilmar: Tropical Oils’ upside offset by Consumer weakness. Recall in our company update report on Wilmar (published 22- Feb-16) that we are neutral on Wilmar as rising CPO prices and contribution from biodiesel tenders will likely be offset by weak consumer demand in China and Africa for the Oilseeds and Grains segment. Further risk could arise if the CNY devalues further, reducing forex translation from its China operations.

Maintain MARKET PERFORM with unchanged TP of RM16.92. We maintain our TP of RM16.92, based on an unchanged Fwd. PER of 19.5x on unchanged Fwd. EPS of 86.7 sen. Our 19.5X Fwd. PER valuation is based on the 3-year historical mean valuation, justified by our neutral outlook on PPB and its associate Wilmar.

Source: Kenanga Research - 2 Mar 2016