PPB weighs options on cash, may raise stake in Wilmar

KUALA LUMPUR: PPB Group Bhd, which is sitting on a huge cash pile of RM1.2bil, does not rule out increasing its stakes in associate Singapore SGX-listed company Wilmar International Ltd.

PPB which owns an 18.55% stake in Wilmar, may do so if valuations compress or prices go down, however, its managing director Lim Soon Huat said it was not a priority for the time being yet.

“We are already the single largest shareholder at 18.55%, our (effective) stakes have actually increased because Wilmar has been buying back its shares. It is not our priority to continue to invest in Wilmar now,” Lim said at a press conference yesterday.

“We want to take advantage of our cash to use it for any other new opportunities that may arise. Despite not being a priority, we cannot rule it out if the share price becomes very attractive,” he added.

Because of its large base of operations and translation effects, Wilmar constituted up to 70% of PPB’s earnings, he said.

“Wilmar will continue to remain an integral part of our company,” Lim said.

The company, which is the flagship of Robert Kuok in Malaysia, also ruled out a special increase in dividends to appreciate longer-term investors.

“We have been rewarding our shareholders and we want to be conservative. Payouts have increased this year as well. The most important in riding through the difficult times is to be more conservative while growing our business,” Lim said.

“We want to maintain a strong position and it is not our policy either to boost our share price by giving bigger dividends,” he added.

Kuok, who is a Malaysian based in Hong Kong, is Asia’s richest man and made his money from trading sugar and other commodities. Wilmar is a company that is managed by his nephew Kuok Khoon Hong.

On the outlook of wheat prices, PPB director Datuk Ong Hung Hock said prices may “remain at current levels”.

“But who is to know, as these are all very weather dependent while forecasts are all man-made. Mankind is not in command of the weather. The effects of El-Nino is only confined to the South-East Asian countries not the wheat growing area and it will not affect,” Ong said.

“On the flipside, the wheat growing areas are currently having God-given good weather to forecast a higher production of wheat. But remember that quantity is not a greater (factor) than quality,” Ong added.

Wheat futures for May 2016 delivery, on the Chicago Board of Trade last traded at US$ 454.5 per bushel (RM1,896.40), at near its historical 12-year lows.

The diversified group also announced a capital expenditure allocation of RM383mil for the next three years to be mainly funded internally.

About half of the allocation of RM199mil will be pumped into the grains and agribusiness for its investments into its flour mills in China and to increase the capacity of the flour mill in Pasir Gudang by 500 tonnes medium-to-hard wheat per day. It will also contruct a 500-tonne-per-day flour mill in Vietnam.

Most of the remainder of the commitment of RM161mil will be alloted for the expansion plans to defend its leading position in the film exhibition & distribution business (FEDB).

“For this year, we will not be opening any new cinemas because completion of new malls will only happen next year. We have opened five new cinemas last year. We will be opening our new screens in Mid Valley Megamall (four), and Summit (three),” its head of corporate affairs Koh Mei Lee said.

“In the pipeline, we have another seven new cinemas to be opened in 2017 and 2018. We have 302 screens in 33 locations, at present,” Koh said.

The FEDB segment is the second largest constituent or 17% (RM66mil) to its profits in the financial year 2015 (FY15).

PPB had also increased its equity interest in Vietnam-based associate Galaxy Studio JSC to 40% from 25% in the fourth quarter of FY15.

Capital investments in the FEDB segment will also be channelled towards its joint venture to establish a cinema in Phnom Penh, Cambodia. “This will be our first presence in Cambodia in the largest shopping mall there with nine screens and is due for opening in August or September of this year,” she said.