Wilmar seen to boost PPB Group performance

PETALING JAYA: PPB Group Bhd looks poised to report record earnings for financial year 2022 (FY22) on the back of strong contributions from its associate company, Wilmar International Ltd.

Wilmar, which is listed on the Singapore Exchange, recently reported another record quarterly earnings for its third quarter (3Q) where core net profit rose 38.2% to US$796.7mil (RM3.8bil) from a year ago.

For the nine-month period, Wilmar’s core net profit surged to US$2bil (RM9.5bil) on the back of a 17.9% increase in revenue.

Wilmar contributes about 75% to 80% of PPB’s earnings, according to UOB Kay Hian (UOBKH) Research.

Following this better-than-expected earnings, UOBKH said it has raised Wilmar’s 2022 core net profit forecast by 25%.

“This translates to 40% higher earnings to PPB’s net core profit forecast for 2022. With this, we expect a higher dividend yield of 3.7% for 2022,” the research firm said in a report on PPB Group.

As for PPB, UOBKH has revised up its earnings by 41% for 2022, after factoring in the strong contribution from Wilmar, plus a stronger Singapore dollar.

PPB, which counts tycoon Robert Kuok as the major shareholder, is also expected to see better margin recovery from its consumer-related segments, while its film exhibition and distribution segment is likely to make a stronger return, said UOBKH.

“PPB increased its Massimo bread prices by 10 sen to 60 sen from mid-October onwards.

“Both cooking oil and bakery contributed 50% to 60% of the consumer product segment’s total earnings.

“The average selling price (ASP) of bakery products has increased by 10% to 20%, while the cooking oil ASP has increased 30% to 40% year-to-date,” it noted.

As for its grain and agribusiness segment, it said wheat and soybean meal prices had dropped by about 35% and about 10%, respectively, from their peak.

“Both wheat and soybean meal account for 80% to 90% of the total cost of sales for the flour and animal feed sub-segment, respectively. With these and PPB’s timely procurement, we expect to see margin expansion for the grains and agribusiness segment,” UOBKH said.

Meanwhile, PPB’s film exhibition and exhibition segment, which posted two years of losses, turned profitable in 2Q after the full reopening of cinemas.

“The 2Q operating profit also recovered to above pre-Covid levels, which we attribute to Golden Screen Cinemas’ digitalisation process and the group’s cost-saving efforts.

“We expect this segment to continue delivering good earnings, supported by strong movie titles lined up,” it added.

Besides this, the acquisition of MBO Cinemas would help to boost PPB’s film and distribution segment.

“Management guided that it will reopen the acquired MBO cinemas (currently rebranded to GSC) in 16 locations in the second half of 2022, which would result in significant contribution to its bottom line.”

Where capital expenditure is concerned, PPB has allocated RM875mil for the next five years, with RM412mil to be channelled for the investments in China flour mills, silo and maize facility in Pulau Indah.

Apart from this, PPB has also allocated RM379mil to build new cinemas and upgrade existing ones.

Some RM75mil has been allocated for the consumer product and other segments for the purchase of equipment and office renovation, said UOBKH.