Monday 12 March 2012

About PPB Group Bhd

Contribution from Wilmar made up close to 75% of PBB's pre-tax profits of RM1.06 billion in FY2011. Stripping out the one-off gain from the disposal of sugar business, Wilmar's numbers would have made up 60% of PBB's pre-tax earning in FY2010.

Some 70% of PBB's RM19.8 billion market capitalisation is made up of its 18.33% stake in Wilmar, which had a market cap of S$31.4 billion (RM75.4 billion) at the time of writing

This effectively means that PPB's own businesses which generated RM228million in earnings on the back of RM2.71 billion in sales last year are worth RM6 billion.

Its massive war chest is being put to good use for expansion in China, Indonesia, Malaysia and Vietnam.

PPB's own businesses include its flour milling operations at FFM Bhd, which is doubling its flour milling capacity in Indonesia and began selling Massimo bread in the Klang Valley last July.

The inability to completely pass on the higher cost of wheat to consumers has been eating into the margins of FFM, it's largest in-house operation.

While growth could come from the swap of a 20% stake in FFM for a 20% stake in Wilmar's existing and new flour mills in China, and future expansion tie-ups like the joint venture in Vietnam, returns would take time.

Some 70% of the RM507 million capital PPB has committed through 2014 goes into growing the flour business.

Other PBB businesses are easily missed due to their relative size within the group. PBB markets its own consumer products like cooking oil (Neptune, Seri Murni and Krystal brands); canned and frozen food under the Marina brand; beverages under the Shamu brand; and Blue Key flour while Seri Murni also produces table eggs and curry paste.

PPB's distribution network is also used to market third-party products like Lingham's Chili Sauce, V-Soy soya milk, Clorox bleach and Johnson & Johnson personal care products. Margins are thin in this segment, though, generating only RM19 million in earnings on RM375 million in sales last year.

Golden Screen Cinemas Sdn Bhd (GSC), Malaysia's leading cinema operator, with some 40% market share that made RM37 million in profit on a turnover of RM283 million last year. Some RM130 million has been set aside for 11 cinema openings planned through 2014, some of which will cater for smaller but burgeoning cities.

For the environmental-engineering and waste-management segment, which made RM9.8 million in pre-tax profit on RM154 million in revenue last year, some RM8.5 million has been set aside as capital expenditure.

Over the next year or two, it may be the property segment that proves worth watching. Another 100 million could be set aside in 3Q2012 to expand the property business, which has an earmarked capex of RM13.5 million.

PPB's ongoing developments have an estimated gross development value of RM250 million. Numbers will be better this year as there were no new launches last year.

But what is giving the property division new space for expansion is its recent acquisition of Cathay Screen Cinemas Sdn Bhd, now 100% owned by PPB. That gave it 10 properties with a total land area of over 400,000 sq ft in Kedah, Penang, Perak, Selangor, Johor, sabah and Sawarak.

"Most of the properties are stand-alone cinemas, which have been closed and are currently leased out for retail purposes, except for a tract in Taman Megah (Petaling Jaya) and a 36-shoplot office block in Damansara Jaya, Selangor."

The tract in Taman Megah near Ming Tien Food Court, on which a badminton court now stands, it could potentially be turned intoa condominium-cum-retail mall, but nothing has been finalised.

PPB also owns and manages three retail and commercial properties: Cheras LeisureMall, a fully occupied suburban mall with 261,000 sq ft of lettable space; Cheras Plaza (office, commercial and entertainment); and the New World Park retail complex in Penang with 87,000 sq ft of lettable area. Cheras LeisureMall is carried at RM53.41 million in its books.

PBB has RM877 million in net cash (74 sen per share).

Wilmar emerged as a 10% shareholder of Australian Securities Exchange listed Goodman Fielder Ltd, Australia's biggest baking company with consumer businesses that Wilmar saw as complementary to its own.

Wilamr said to be among suitors for a stake in Gavillion Group LLC, a grains trader with a sizeable fertilizer business.

Abstracted from The Edge Weekkly 12 March 2012.

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