PETALING JAYA: With a higher contribution expected from associates and stable earnings from the grains and agribusiness segment and consumer products segment, PPB Group Bhd is expected to post a resilient performance in the second half of this year.
This has led UOB Kay Hian Research (UOBKH) to maintain its earnings forecast for the diversified group.
“We reckon that these segments will continue to be buoyed by strong consumer demand for essential product, ” it said.
“We also expect contributions from PPB Group’s associates to increase to 80%-85% from 70%-75%, ” said UOBKH in its latest report.
However, the mall and the film exhibition and distribution segment, despite increased show times and more screens for popular titles in cinemas, will weigh heavy on its performance.
UOBKH, which is maintaining a buy call on PPB Group, has a target price of RM19.20, anchored by a strong catalyst from its associate and a potential special dividend in 2021.
Under a blue-sky scenario, the research unit expects PPB’s fair value to be RM21.20.
Meanwhile, the research unit said the impact from Covid-19 pandemic will continue to weigh on the group’s film exhibition and distribution segment.
It also expects the property segment will continue to be affected as 20%-40% of rental rebates will be given to some tenants on a case-by-case basis.
The PPB Group management has mentioned that footfall in the mall has started to recover to 60%-70%. But property sales is expected to remain sluggish.
The film exhibition and distribution segment will continue to be affected by Covid-19 as most movie title releases have been deferred to 2021.
Having said that, this segment has started to see recovery, with encouraging response for recent titles such as Peninsula, Tenet, Mulan and Break The Silence.
To mitigate the impact from the 50% reduction in capacity (for social distancing), the group’s Golden Screen Cinema (GSC) has increased the show times and is offering more screens for popular titles.
The group’s grains and agribusiness segment is expected to remain resilient.
“Wheat prices went through a roller coaster ride and have increased by 15% year to date.
“This might trim some of the operating margin but would be cushioned by the strong sales recovery from the hotel, restaurant and catering customers.
“The management expects this segment to continue to perform satisfactorily as demand for essential staples and purchases of flour and eggs remain resilient, ” added UOBKH.
The group’s consumer packs are expected to maintain the sales momentum with strong consumer sentiment by focusing on food services channels and other channels via the e-commerce marketplace. Demand for packed frozen food remains stable.
Meanwhile, the environmental engineering and utilities segment is able to recommence operations after the easing of the lockdown, and will continue to focus on replenishing its order book and exploring new project opportunities.
The current order book stands at RM530mil over the next three years. ‘
The segment has also tendered for water projects in Peninsular Malaysia and Sarawak valued at RM413mil.
The awards of these tenders are likely to be announced in the fourth quarter of this year.
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