Is there still Upside in PPB?

Is there still upside in PPB?

This is an independent appraisal of a blogger on PPB.

Let us hear his arguments.

At the current price of RM17.70, he is still calling for a buy. Caveat emptor.

Apparently, many quarters have sort of ‘written-off" PBB counter with HOLD or SELL recommendations since its disposal of its sugar business with most favouring direct investment into Wilmar International.

PPB after hiving off a chunk of its profits as dividends to shareholders (RM600million)still have in its coffers the balance of RM600 million. This they intend to use to expand the flour business which is very lucrative. The Indonesian plant commenced operation during the last quarter of 2009. Coming on-stream in this financial year is the bakery business.

So, according to this blogger, earnings per share will be in the region of RM1.30 or better for fiscal 2010. His calculation was based on the following premises.

Roughly an earnings per share (eps) is going to be in the same region of RM1.30 or better for FYE 2010. The calculation of the eps of 2009 of RM1.36 is based on the breakdown of contribution from Wilmar at RM1.04; from the flour revenue at RM0.14 and from sugar at RM0.18 respectively.

According to our blogger friend, at RM17.70, the PER of PPB  works out to be a conservative 13X which he deems relatively low when compared to its peers in KLK,IOI and Sime all at the 16X level.

At RM17.70, the market capitalisation of PPB is RM21 billion.

He then drew our attention to PPB’s intrinsic asset value.

Contribution from Wilmar (its 18.4% associate) -  at current SGX quote of S$6.85; PPB's share is worth RM19.2billion. The TP of Wilmar is expected to move up possibly  to S7.50 next

Contributions form other segments - such as flour, cinema, engineering, chemical, livestock, property & others @ book value. This will be approximately RM2.9billion.

Using simple arithmetics, our blogger friend is of the opinion that PPB’s market capital is worth RM22.1billion or translated to a potential price of RM18.62 (13.7X current year eps).

He added that PPB’s balance sheet is also healthy where NTA is RM11.88 on a net cash position of RM468 million.

So, anyone willing to take a bet on this blogger?