PPB: The Waikari Chinese Acquisitions

Waikari Sdn Bhd, a full-fledged subsidiary of Federal Flour has proposed to take a 20% interest in two Chinese-based comapanies namely-Dongguan Yihai and Yihai Zhoukou. Both are local flour millers.

Experience, Infrastructure and Customer Base

Federal Flour is 80% owned by PBB.

Penetrating China Piggyback Style

Why these investments at a lowly 20%?

According to PPB, this is to tap of the vast network of Wilmar in China especially its existing infrastructure and broad customer base. Riding on Wilmar's experience in China, PBB expect to navigate the procedural  and legal complexities and vagaries of trading in the various provinces as each apparently are governed by its own set of legal frameworks. Moreover flour consumption per capita is expected to increase in the burgeoning Chinese market. This is also in line with PBB strategy to expand its market share overseas.

The Chinese economy is also expected to be resilient despite the government easing of an overheated property market through interest administration.

Given the bright scenario and the realistic market penetrating strategy via taking minority equities in these local flour milling outfits, PPB expects it to offset for lower Wilmar dividends and to contribute to its bottom line, by and by.

International Bottom line Considerations

So, have a hard look at PPB and buy on weakness.