Friday, March 4, 2011

HDBSVR maintains PBB as fully valued, cuts TP to RM15

KUALA LUMPUR: Hwang DBS Vickers Research is maintaining PPB GROUP BHD [] as fully valued and sum-of-parts target price has been reduced to RM15.

'PPB's share price has fallen 11% since our downgrade in November 2010. We expect further downside as valuation remains uncompelling at 18-19x FY11-12F PE,' it said on Friday, March 3.

HDBSVR said it cut PPB's FY11-FY12F EPS by 15-20% after imputing lower Wilmar earnings.

This is premised on expectations the group would grow its soybean volumes less aggressively, and lower Oilseeds M&P margins would be offset by higher Palm & Lauric margins.

'Balance sheet remains strong with RM809m net cash (RM0.68/share). There are no plans to raise its stake in Wilmar, and FY11 group capex excluding expansion, should be minimal at RM120m,' it said.

On Thursday, PPB said at its analyst briefing that it faces a challenging year ahead with rising commodity prices and fuel costs affecting its flour business.

But the impact would be somewhat offset by still strong consumption patterns. Wheat prices remain high at US$9.42/bushel, albeit down from a peak of US$10.3 in mid-Feb 2011, but PPB believes it could drop further with new planting in Australia after the floods and softer US/Europe exports to the Middle East.

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