PPB upbeat on its prospects for 2015

by **Cals** Sun 08 Mar 2015, 20:20

PPB upbeat on its prospects for 2015

By Meena Lakshana / The Edge Financial Daily | March 6, 2015 : 10:06 AM MYT

KUALA LUMPUR: [size=14]PPB Group Bhd ([You must be registered and logged in to see this image.] Financial Dashboard), the Malaysian-listed flagship of billionaire Robert Kuok, expects to record growth in revenue this year, driven largely by its core segment of flour, feed milling and grains.

PPB Group managing director Lim Soon Huat said the group is optimistic about its prospects for 2015 but stopped short of revealing figures on its expected growth.

“The flour, feed milling and grains segment has always been the largest contributor of our core segments,” he told reporters after a briefing on the group’s prospects for 2015 yesterday.

“We expect to see a similar proportion this year,” he said.

In financial year 2014 (FY14), the flour, feed milling and grains segment contributed 61% to the group’s total revenue of RM3.701 billion and 57% of its total segment profit of RM313 million. This was due to higher flour sales volume in Indonesia, Vietnam and Malaysia, as well as increased animal feed volume. Higher profit in the segment was due to improved net foreign exchange value, increased sales volume, better recovery of fixed costs, and margins.

Lim also said PPB Group (fundamental: 2.7; valuation: 0.6) is optimistic about its financial performance this year, although he conceded it is going to be a challenging year ahead.

“We are optimistic. If you look at our prospects in the core segments other than Wilmar (International Ltd), our revenue is sustainable for this year,” he added.

PPB Group is the single largest shareholder in Wilmar, with an 18.3% stake.

Wilmar’s earnings contribution to PPB Group had declined in FY14 to 67% or RM695 million compared with 71.8% or RM764 million in FY13, due to low crude palm oil (CPO) prices.

This, coupled with lower income from its investment in equities and losses in the packaging business, had impacted PPB Group’s profit before tax (PBT) in FY14, which dipped 3% to RM1.03 billion compared with RM1.06 billion in FY13.

PPB Group’s revenue, however, rose 12% to RM3.7 billion in FY14 compared with RM3.31 billion in FY13, largely driven by the growth of its core segments, even though Wilmar remained its largest contributor in earnings. This year, PPB Group is committing RM208 million in capital expenditure to its flour, animal feed and grains segment. This sum is inclusive of its investment in its associates in China as well as expansion and upgrading of related plant machineries.

PPB Group director Datuk Ong Hung Hock said there will be increased production of its flour mills in Vietnam as its newly-commissioned mill in northern Vietnam in January this year will be producing 500 tonnes of flour per day. The company will also be expanding its mill in Pasir Gudang, Johor.

Meanwhile, Lim said the environmental and engineering segment is expected to achieve a higher revenue this year as the contracts progress to the construction phase.

He said the group’s current construction order book stands at RM413 million, which should last it 2½ years.The group secured six projects with a combined sum of RM261 million last year and also secured a subcontract for the mechanical and electrical works for project air mentah Refinery and Petrochemical Integrated Development project in Pengerang, Johor.

PPB Group will also be committing RM283 million to expand and upgrade the stable of cinemas under Golden Screen Cinemas Sdn Bhd (GSC), the wholly-owned unit of its entertainment arm, PPB Leisure Holdings Sdn Bhd.

GSC chief executive Koh Mei Lee said GSC will be opening 11 cinemas this year; three of them have recently opened in Nu Sentral in Kuala Lumpur, IOI City Mall in Putrajaya and Ipoh Parade shopping mall in Ipoh.

Meanwhile, PPB Group expects its property segment to perform satisfactorily despite subdued sentiments in the local property market.

It is banking on its Puteri Harbour project in Nusajaya, Johor, with a gross development value (GDV) of RM1.5 billion, to drive the segment’s performance, said PPB Group (properties) chief operating officer Chew Hwei Yeow.

Chew said 50% of its phase 1, comprising 456 condominium units in two towers, with a GDV of RM650 million, have been snapped up even before its official launch. The development is helmed by Southern Marina Development Sdn Bhd, of which PPB Group holds a 28% indirect stake. Southern Marina is a 70:30 joint-venture company between Huge Quest Realty Sdn Bhd (in which Kuok Brothers Group holds a 60% stake, with the remaining 40% under PPB Group) and Khazanah Nasional Bhd’s wholly-owned unit, Tanjung Bidara Ventures Sdn Bhd.

PPB closed at RM14.58 yesterday, down 38 sen, with a market capitalisation of RM17.28 billion.

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This article first appeared in The Edge Financial Daily, on March 6, 2015.
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