No,They are Certainly not Hassasins!

It looks like the poster of a movie. The leads do not ring a bell though their attire may.

No, those are not weapons but domestic equipment.

Well, that is another of my nephew getting married very soon.

Kinda creative, don't you think?

Patrick's Convocation

My nephew Patrick graduated recently from the Multi-Media University recently. I recollect my own graduation some 35 years ago.

He must have felt the same euphoria,I am sure.

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?

PPB-Furtive Moves

Two historic milestones of PPB happened in 2009.

The First Milestone:

Last year on September 2009, shares in PPB saw its biggest single-day decline as investors reacted to speculation that its affiliate Wilmar International Ltd may delay the sale of shares of its China operations in Hong Kong due to soft market sentiment. PPB’s share price fell as much as 4.6% before closing down 54 sen, or 3.4%, at RM15.40 after hitting a record RM16.04 on Sept 24 and had risen 65% year-to-date.

The local planter, controlled by tycoon Tan Sri Robert Kuok, owns an 18.4% stake in Singapore-listed Wilmar – the world’s biggest palm oil trader. “PPB is a proxy play to Wilmar,’’ a dealer at a local stockbroker said. Shares in Wilmar closed 2.9% lower yesterday at S$6.32 in Singapore – its lowest in almost a month. It had earlier fallen by as much as 6% after a financial website said the company may postpone the listing date for its China operations.

“The listing of Wilmar China Ltd on The Stock Exchange of Hong Kong Ltd is still in progress and has reached an advanced stage but no decision has been taken as to the specific timing of the listing,” Wilmar said in a statement to the Singapore Stock Exchange yesterday in response to media reports. “The company and Wilmar China are monitoring market conditions’’ to decide on the initial public offer (IPO) structure and timetable, Wilmar said. The statement said Wilmar would proceed with the EGM to be held on Oct 2 in Singapore to consider the disposal of its stake in Wilmar China in connection with the listing.

Analysts at UBS and BoA-Merrill Lynch said in research reports on Wednesday that Wilmar would delay the IPO from an end-October schedule, because of a volatile or weak Hong Kong IPO market, Reuters reported. In May, Wilmar was reported to have said it planned to sell between 20% and 30% of its China unit to the public.

Wilmar China supplies about half of China’s cooking oil needs. The unit accounted for about half of Wilmar’s revenue of US$14.3bil achieved last year and about 40% of its net profit.

Meanwhile, PPB’s 18.4% stake in Wilmar contributed more than 70% of the group’s net profit in the first six months of this year. AmResearch analyst Gan Huey Ling believed that the listing of Wilmar’s China operations would proceed, albeit at a later date. “In any case, we reckon that the listing will be completed by year-end,’’ she said.

The Second Milestone:

A massive disposal was announced by PPB  on October 30 that it was is selling its sugar refining operations, under Malayan Sugar Manufacturing Co. Bhd (MSM) to Felda Global Ventures Holdings Sdn Bhd for RM1.22 billion. It added it was always throwing in its 50% stake in Kilang Gula Felda Perlis Sdn Bhd also to Felda Global ventures for RM26.31 million.

It also added that  it was disposing of parcels of land measuring 5,797 hectares in Chuping, Perlis for a cash consideration of RM45 million.

Apart from that, its 49% associate Grenfell Holdings Sdn Bhd was also selling a 20% stake in Tradewinds (M) Bhd, representing 59.29 million shares also to Felda Global Ventures for RM207.53 million or RM3.50 per share. The cash consideration of RM3.50 per TWM share is 25.90% and 21.95% over RM2.78 and RM2.87, being the five-day volume weighted average market price (VWAP) of TWM shares and three-month VWAP of TWM Shares up to Oct 29, 2009 respectively. Felda Global Ventures is a unit of the Federal Land Development Authority and it is the group's integrated commercial arm.

On the disposal of MSM, PPB said it would be the sole beneficiary of all profits after tax of MSM from Jan 1, 2009 up to Dec 31, 2009. It added the price tag for the sale of MSM represented price-to-earnings ratio of 9.78 times and price-to-book ratio of 2.46 times. PPB said its cost of investment in MSM was RM50.79 million, made from 1976 to 1999. It would stand to gain RM1.17 billion and RM723.81 million at company and group level respectively.

"The proposed disposals present an opportunity for PPB to realise its investments in MSM, Kilang Gula and the Chuping land at a substantial gain.”The net disposal proceeds will be used to finance other strategic investment options and opportunities that may be available to the group both domestically and overseas with the ultimate objective of providing optimum benefits and returns to the company and its shareholders," it said.

To date, PPB has paid interim dividends two times in 2010. The first one for the first quarter of 2010 of the current fiscal year was 18% and the current pay-out after the second quarter results are a one-tier dividend of 65 sen and another special one-tier dividend of 5% as reward to loyal shareholders.