WILSON & YORK 28/2/2017

Transcription

1 Financial Year End 31/12/2016 Report Period Ending 31/12/2016 Reporting Quarter 4Q-2016 RESULTS REPORT Recom m endation HOLD Target Price (MYR) Current Price (MYR) Industry Group Industry Sub Group FTSE-BURSA INDEX MEMBERSHIP REPORT INDEX Consumer Products Food Manufacturing Key Com pany Statistics Bloomberg Ticker PEP MK Bursa Stock Code 4065 Issued Capital (mn shares) 1,185.5 Market Capitalisation (MYR mn) 19, w eek High (MYR) w eek Low (MYR) Average Volume (3 month) Yr Return (%) 5.0 Major Shareholders (%) Kuok Brothers Sdn Bhd 50.8 Employees Provident Fund Board 6.3 Nai Seng Sdn Bhd 3.4 FBMKLCI FBM70 FBMEMAS FBMHIJRAH Yes No Yes No Contents Page Recommendation, Company Profile, Metrics 1 Quarterly Results, Competitor's Metrics 2 P&L, Balance Sheet, Per Share Data 3 10 Yr Op Profits; 14 Yr Price, P-BV charts 4 Sales and Results By Operating Division 5 Recommendation Record, FBMKLCI Ranking 6 Company Contacts, Analyst's Disclosure 7 SHARE PRICE LAST 12 MONTHS (MYR) YTD 4Q FY16 revenue increased 3.4% vs YTD 4Q FY15, driven by an 5.7% increase in grains/agribusiness sales. Meanwhile, YTD 4Q FY16 grains/agribusiness margins came in at 9.3%, vs 9.6% YTD 4Q FY15. Group PBT rose 2.5% YTD 4Q 2016, as profits at Wilmar recovered smartly. Over PPB averaged about 62% of PBT through Wilmar. Revenue in the grains, cinema and consumer product divisions are all on a steady growth trajectory. Profit growth in grains and film divisions will continue to drive operating results over the next few quarters. FY 2017 profits at Wilmar are likely to be considerably better than FY 2016 profits. See page five. INVESTMENT RISKS Risks to our recommendation and target price include: i) increases in the price of w heat and soybeans ii) strengthening of the MYR exchange rate, and iii) a sharp slowdown in the general level of economic activity in Malaysia and regional economies particularly China and Indonesia. The outlook for Wilmar seems generally positive, however debt levels in China are worrisome. And though we expect the CNY to weaken this year, the stronger USD will tend to support associates contribution. RECOMMENDATION We maintain our HOLD recommendation whilst increasing our fair value estimate to Uncertainty in China and Europe is affecting business conditions in many major markets. However, net margins at Wilmar are expected to range between % over Operationally, PPB continues to strengthen. Note that a strong USD tends to increase the MYR contribution from Wilmar. Please refer to pages 5 and 6 for more reasons to include PPB in a prudent portfolio of equities. PPB s stock price may surprise on the upside as growth in Wilmar s profits may be higher than we are projecting. Group operating profts are healthy and any downside in the share price likely presents a buying opportunity. Still, global economic conditions remain fragile and the ride ahead in many stock markets is likely to be a bumpy one. COMPANY PROFILE PPB was incorporated in Malaysia in 1968 to undertake sugar cultivation and refining. The company began oil palm cultivation in 1986, entering into flour and animal feed milling in PPB was listed in May 1972 with a paid-up capital of MYR 15 mn. Using FY16 owner equity of MYR 20.9 bn, shareholders have seen book value grow 17.8% pa since listing. PPB and its associates operate mainly food businesses in many countries throughout Asia and Europe. PPB is the largest single shareholder of Singapore listed Wilmar International Ltd ( Wilmar ). ANNUAL RESULTS AND METRICS (MYR mn) Share Price (M $14.00 $15.00 $16.00 $17.00 $18.00 $ Revenue 4, , , ,649.6 Revenue g (%) Net Prof it 1, , , ,193.4 Net Prof it g (%) Dividends Ow ners' Equity 19, , , ,643.2 Total Liabilities 1, , , ,039.1 Debt/Equity (%) EPS (sen) P-S (x) P-E (x) P-BV (x) ROE % Page 1 of 7

2 QUARTERLY RESULTS TABLE (All figures in MYR mn unless otherwise indicated) FY Dec 4Q-16 4Q-15 Q-o-Q YTD YTD Y-o-Y %chg FY16 FY15 %chg Revenue 1, , , , Operating Expenses , , , Other Income Share of Associates Depreciation/Amort'n Finance Costs Pre Tax Profit , , Tax Minority Interest >100 Net Profit to S'holders , , Dividends na Comments YTD 4Q 2016 revenue increased 3.4% vs. YTD 4Q 2015, driven mainly by the grains, film, and consumer products divisions. Wilmar's YTD 4Q 2016 revenue increased 6.8% w hilst net profits decreased 5.0% over the same period. How ever, Wilmar's sequential quarterly profits again moved strongly into the black. EPS (sen) DPS (sen) na Operating Margin (%) Net Margin (%) Effective Tax rates (%) NTA/share (RM) Q 2016 margins w ere crimped by film division; how ever film margins w ill recover. Group margins are likely to remain above 8% for the next few quarters. COMPETITOR S METRICS (All figures in MYR mn unless otherwise indicated) C u r r e n t FY* PPB Gr o u p Bh d M alayan Flo u r M ills Bh d QL Re s o u r ce s Bh d En d in g De c-17 De c-17 M ar -18 Rev enue 4, , ,018.0 Net Pr of it 1, Ow ners ' Equity 21, ,889.0 Div idends Market Cap 19, ,566.1 P-S (x ) P-E (x ) P-BV (x ) Div Y ield (% ) Net Margins (% ) RO E (% ) Pay out Ratio (% ) Sales Grow th ( % ) Debt/Equity (% ) *Consensus data used f or peers where av ailable Page 2 of 7

3 PROFIT & LOSS (All figures in MYR mn unless otherwise indicated) PBB GROUP BHD Revenue 4, , , ,649.6 Operating Expenses -3, , , ,338.1 Other Income Share of Associates Depreciation/Amortization Finance Costs Pre Tax Profit 1, , , ,348.6 Tax Minority Interest Net Profit to Shareholders 1, , , ,193.4 Operating Margin (%) PBT Margin (%) Net Margin (%) Effective Tax Rate (%) BALANCE SHEET (All figures in MYR mn unless otherwise indicated) Total Assets 21, , , ,377.4 Fixed Assets 1, , , ,553.2 Current Assets 2, , , ,539.2 Other LT Assets 17, , , ,285.0 Current Liabilities 1, LT Liabilities Total Liabilities 1, , , ,039.1 Share Capital 1, , , ,185.5 Minority Interest Ow ners' Equity 19, , , ,643.2 Total Equity 20, , , ,338.3 Total Liabilities & Equity 21, , , ,377.4 PER SHARE DATA (All figures in sen unless otherwise indicated) Revenue Cash Flow Earnings Dividends Declared Book Value Payout (%) P-S (x) P-CF (x) P-E (x) P-BV (x) Dividend Yield (%) ROE (%) Total Debt/Equity (%) Page 3 of 7

4 OPERATING PROFITS - Q TERLY LAST 10 YRS (MYR mn) OP MARGINS - Q TERLY LAST 10 YRS (%) SHARE PRICE - MONTHLY LAST 14 YEARS (MYR) P-BV (X) - MONTHLY LAST 14 YEARS Share Price (M P-BV (X Operating Profits MYR % 5.0% 10.0% 15.0% 20.0% 25.0% Operating Margin Page 4 of 7

5 RESULTS BY OPERATING DIVISION Sale s (M YR m n) E 2018E 3 yr CAGR % Gra in s /Agrib us ines s 2, , , , % C ons um er % Film % Env. Eng /U tilitie s % Pro p % In ves t\oth ers \C h em % Elim % Tota l 4, , , , % Annual % Cha nge 9.4% 3.4 % 4.8 % 6.0% 3 yr CAGR Op Profits (M YR m n) % Gra in s /Agrib us ines s % C ons um er % Film % Env. Eng /U tilitie s % Pro p % In ves t\oth ers \C h em n a Tota l % Annual % Cha nge % -4.9 % 4.4 % 6.3% Ope rating M a rgins 3 yr Avg % Gra in s /Agrib us ines s 9.6% 9.3% 9.0 % 9.0 % 8.9% C ons um er 4.3% 3.5 % 4.0 % 4.0 % 4.4 % Film 1 5.1% 12.6 % 13.0% 13.0% 14.7% Env. Eng /U tilitie s 4.1% 3.3 % 2.7 % 3.0 % 3.7% Pro p 3 8.5% 32.4 % 32.0% 32.0% 38.7% In ves t\oth ers \C h em 8.3% 4.9% 6.0 % 5.8 % 1.2% Tota l 9.9% 9.1% 9.0 % 9.1% 9.1% 3 yr CAGR Source of Profits % Segm en t R es ults % As s o ciates % Gro w th in As s ociates 5.1% 6.3 % 6.9% Op profits/as soc ia tes % 45.7 % 44.9% 44.7% 1.6% Historically, PPB s operating profits have been driven by the grains, consumer and film exhibition division. Looking ahead, we expect operating profits at the grain and consumer division to maintain steady growth, whilst the film division is expected to recover some momentum in FY PPB is a very steady performer. For example it routinely ranks in the top half of the FBMKLCI for either sales or operating profit growth. In FY 2016, PPB ranked in the top half for sales growth. See Page 6 for our table showing the sales growth rankings. In addition, PPB continues to outperform the FBMKLCI on a total return basis. PPB has made excellent progress in its grains and film businesses over the years. Additions to milling capacity are on track to increase by 5% per year in 2017 and 2018, whilst cinema screen roll-outs will grow 7-10% over the same period. Profits at Wilmar took a beating in FY 2016, however FY 2017 profits are expected to show solid growth. As its sales and operating profit growth rates attest, PPB remains one of the safest ways to gain exposure to the Malaysian equity market, offering solid growth in capital gains in the years to come. Investors following PPB will recall that it was added to the Securities Commission s Shariah-compliant list in November This has led to much wider interest in PPB among government linked institutional clients in Malaysia, which can be observed both from analyst briefings and the daily reported share transactions. Indeed the 4Q 2016 analyst briefing included a number of new analysts. Given our cautious FY 2017 outlook for the local equity market, PPB offers two compelling reasons for a place in investors portfolios 1) one of the strongest balance sheets among the FBMKLCI members (Total Debt/Common Equity < 6%) and 2) a well run suite of diversified businesses that continue to deliver solid growth in sales and operating profits. Should interest rates rise in 2017, PPB will fare much better than other members of the FBMKLCI, many of which are highly geared. Page 5 of 7

6 ANALYST S RECOMMENDATION RECORD Ticker Date Recom mendation FairValue Price At Date of Recommendation % Price Change Since Prior Recommendation PEP MK Equity 28-Feb-14 BUY % PEP MK Equity 21-May-14 HOLD % PEP MK Equity 27-Aug-14 HOLD % PEP MK Equity 26-Nov-14 HOLD % PEP MK Equity 27-Feb-15 HOLD % PEP MK Equity 21-May-15 HOLD % PEP MK Equity 26-Feb-16 HOLD % PEP MK Equity 31-May-16 HOLD % PEP MK Equity 25-Aug-16 HOLD % PEP MK Equity 23-Nov-16 HOLD % PEP MK Equity 28-Feb-17 HOLD % Return - Last Three Years 14.1% PPB S REVENUE GROWTH TO RELATIVE TO OTHER 30 MEMBERS OF FBMKLCI T O P H A L F (R EV EN U E M YR M N) YT D 4Q 2015 YT D 4Q 2016 % C H A N G E W E S TP O R TS H O LD IN G S B E RH A D 1,682 2, % K U A LA LUM P U R K E P O N G B HD 14,873 17, % IH H HE A LTH C A R E B E R H A D 8,455 10, % H A P S E N G C O NS O LID A TE D B H D 4,417 4, % P U B LIC B A N K B H D 17,280 18, % A XIA TA G R O U P B E R H A D 19,883 21, % IO I C O R P O R A TIO N B H D 11,764 12, % G E NTIN G M A LA Y S IA B E R H A D 8,396 8, % M A LA Y A N B A NK IN G B H D 29,671 31, % TE N A G A N A S IO N A L B H D 42,937 45, % C IM B G R O U P H O LD IN G S B E RHA D 23,937 24, % H O NG LE O N G B A N K B H D 7,608 7, % P P B G R O U P B HD 4,048 4, % A S TRO M A LA Y S IA H O LD IN G S B E R H A D 5,475 5, % TE LE K O M M A LA Y S IA B HD 11,722 12, % B O T T O M H A L F (REV EN UE M YR M N) YT D 4Q 2015 YT D 4Q 2016 % C H A N G E P E TRO N A S C H E M IC A LS G R O U P B H D 13,536 13, % H O NG LE O N G F INA NCIA L G R O U P B H D 8,157 8, % P E TRO N A S G A S B H D 4,456 4, % G E NTIN G B H D 18,100 18, % K LC C P R O P & R E ITS -S TA P LE D S E C 1,340 1, % M A XIS B E R H A D 8,601 8, % S IM E D A RB Y B H D 44,864 44, % R H B C A P ITA L B HD 10,850 10, % D IG I.C O M B H D 6,914 6, % A M M B H O LD IN G S B H D 6,362 6, % M IS C B H D 10,908 9, % P E TRO N A S D A G A N G A N B H D 25,148 21, % Y TL C O R P 16,436 14, % B R ITIS H A M E R IC A N TO B A C C O (M ) 4,582 3, % S A P U RA K E N C A N A P E TR O LE U M B H D 10,184 8, % T O T A L (R EV ENU E M YR M N ) 392, , % Page 6 of 7

7 CONTACT DETAILS QUESTIONS? CONTACT THE INVESTMENT ADVISER: CONTACT THE COMPANY: Wilson & York Global Advisers Sdn Bhd Suite B-11-3A, Level 11, Block B, Plaza Mont Kiara 2, Jalan Kiara, Mont Kiara Kuala Lumpur Malaysia Tel: Fax: Website: ents.com PPB Group Berhad 12th Floor UBN Tower 10 Jalan P Ramlee Kuala Lumpur Malaysia Tel: Fax: corporateaffairs@pbb.com.my Website: ANALYST S DISCLOSURE BUY: Share price may exceed 10% over the next 12 months TRADING BUY : Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain HOLD: Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT: Target price has been attained. Look to accumulate at lower levels SELL: Share price may fall by more than 10% over the next 12 months NOT RATED (NR): Stock is not within regular research coverage All research is based on materials compiled from data considered to be reliable at the time of writing. However, information and opinions expressed are subject to change at short notice, and no part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. We do not accept any liability directly or indirectly that may arise from investment decision-making based on this report. The company, its directors, officers, employees and/or connected persons may periodically hold an interest and/or underwriting commitments in the securities mentioned. This report has been prepared Wilson & York Global Advisers Sdn Bhd for purposes of CMDF-Bursa Research Scheme ("CBRS") administered by Bursa Malaysia Berhad and has been compensated to undertake the scheme. Wilson & York Global Advisers Sdn Bhd has produced this report independent of any influence from CBRS or the subject company. For more information about CBRS and other research reports, please visit Bursa Malaysia's website at: cmdf_bursa_research_scheme/ All Rights Reserved. No part of this publication may be used or re-produced without expressed permission from Wilson & York Global Advisers Sdn Bhd. J Charles Wilson Head of Research Copyright 2017, Wilson & York Global Adv isers Sdn Bhd See important disclosures on this page Page 7 of 7