MORNING CALL:15/8/23

MIDF Research downgraded PPB Group from “buy” to “neutral”, and cut its target price on the stock from RM19 to RM15.17.

Transcript

00:00 This Tuesday morning, its diversified conglomerate PPB Group, MIDF Research, downgrading PPB

00:07 from buy to neutral, target prices down from RM19 to RM15.17.

00:13 The counter last traded at RM16.20.

00:17 According to MIDF, PPB saw weaker contribution from Agribased Wilma, with first-half FY23

00:24 core profit dropping by half to US$577 million.

00:28 That's just 24% of the research house's full-year estimate.

00:32 This as it witnessed softer profit contribution from its food products and plantation and

00:37 sugar milling segments.

00:38 Recently, PPB proposed to dispose of its 51% equity interest in Pundi Kencana for RM87.5

00:46 million cash and should realise a gain of RM24.8 million.

00:50 MIDF's lashing its earnings forecast for Wilma's contribution by 31% to RM1.3 billion

00:56 for FY23 and 17% to RM1.32 billion for FY24.

01:02 As a result, its earnings estimates for PPB were lowered by 29% to RM1.35 billion for

01:08 FY23 and 16% to RM1.38 billion for FY24.

01:14 With the consolidation in wheat prices, MIDF said, the grains and agribusiness crushing

01:18 margins are normalising, so the segment should continue maintaining the group's operating

01:23 profit at the RM160 million level over the next three years.

01:28 Quick look now at consensus.

01:30 According to Bloomberg data, there are four buys and one hold on PPB, with target prices

01:35 averaging up to RM18.55.

01:38 The stock last traded at RM16.20, so that's a potential return of about 14.5%.

01:44 Thanks for watching.