2019: Good Results Amid Challenging Environment

PPB’s 2019 core net profit of RM1.16bn (+1.7% yoy) came in above our and consensus expectations, mainly due to a higher contribution from Wilmar. The group saw higher profits from its grains and agribusiness division as well as Wilmar but this was partially mitigated by a lower contribution from the consumer products, property, film exhibition & distribution, and environmental engineering divisions. Despite the good 2019 results, we cut our 2020/21E earnings forecasts by 9.7%/4.9% in view of a more cautious macro outlook partly due to the Covid-19 outbreak. Our DCF-derived TP is now lowered to RM18.84; maintain HOLD rating for PPB.

4Q19 Core Net Profit at RM354.7m, Down 11.8% Qoq

PPB Group Berhad’s (PPB) 4Q19 revenue was slightly lower at RM1.18bn, down 1.1% qoq, while PBT declined by 7.9% qoq to RM388.6m. The decline in profit was across all divisions (consumer products, film exhibition and distribution, environmental engineering, property and Wilmar) with the exception of grains and agribusiness. Excluding one-off items, core net profit also declined by 11.8% qoq to RM354.7m.

2019 Core Net Profit at RM1.16bn, Higher Contribution From Wilmar

PPB reported a higher 2019 revenue of RM4.68bn, up 3.4% yoy, mainly attributable to higher contributions from the grains & agribusiness, film exhibition & distribution, and property divisions. The 2019 PBT increased by 8.9% yoy to RM1.27bn, mainly due to higher profit contributions from the grains & agribusiness (due to improved flour prices) and Wilmar (led by a strong performance from its tropical oils business). However, this was partially mitigated by lower profits from consumer products (due to lower sales of in-house products and higher operating costs at the bakery division), film exhibition & distribution (due to the higher cinema operating costs), environmental engineering (due to impairment of an overseas JV) and property (due to lower share of profit from associate). After adjusting for one-off items, PPB’s 2019 core net profit increased by 1.7% yoy to RM1.16bn. This came in above our expectations, accounting for 108% and 109% of our and the consensus 2019 earnings, respectively. The variance was mainly due to higher-than-expected contribution from Wilmar. Also, PPB declared a higher DPS of 23 sen, bringing its total 2019 DPS to 31 sen (2018 DPS: 28 sen).

Source: Affin Hwang Research - 28 Feb 2020