INVESTMENT HIGHLIGHTS

• 1-for-5 bonus issue goes ex

• Neutral on the news

• Earnings estimate maintained

• Maintain NEUTRAL with TP of RM16.16

1-for-5 bonus issue goes ex. PPB Group (PPB) share price has been adjusted as it passed its ex-bonus issue date yesterday on 24-July. Recall that in May-2018, PPB announced its proposal to undertake a 1- for-5 bonus issue. 237.1m shares will be issued, increasing the group’s share base to 1,422.6m shares.

Neutral on the news. We expect PPB fundamentals to remain intact. In our view, PPB earnings will be largely influenced by Wilmar. Historically, PPB profit contribution from Wilmar accounted for 62% to 75% of total earnings in the past 5 years.

Earnings estimate maintained. We maintain our FY18 earnings estimate of RM912m which is a decline of 24% yoy mainly due to expectation of lower earnings from Wilmar in FY18. For FY19, we maintain our earnings estimate of RM1.03b.

Maintain NEUTRAL with TP of RM16.16. Our ex-bonus target price is RM16.16 (previously RM19.40) as we factor in larger share base. The Target Price is based on unchanged valuation method of 1.1x Book Value. Overall, the positive newsflow surrounding potential Wilmar’s China operations IPO will keep PPB share price supported. However, this is neutralised by high chance of earnings to decline yoy.

Source: MIDF Research - 25 Jul 2018