PPB above $20.00 by 15-Jun-2010

  • target price: $20.00 ( 12.87 % in 42 days)
  • price when predicted: $17.72
  • current price: $16.82
  • 2682 days pass target date.
Another counter I personally like is PPB Group (RM17.70). I still recommend BUY !
Analyst seems to 'write-off" this counter with HOLD or SELL recommendations since the Group disposed-off its sugar biz with most stating prefer Wilmar direct esposure.

FYE 2009 EPS RM1.36 Breakdown :
wilmar = RM1.04
flour, etc = RM0.14
sugar = RM0.18

although sugar will no longer contribute to ppb groups bottomline, the funds generated from its sale (RM1.2billion) nett RM600mil after distribute RM600mil to shareholders is to be used to expand its flour biz which is very profitable. Their Indonesia plant was operational in last Q 2009. they have the bakery coming on-stream this financial year. roughly eps is going to be in the same region of RM1.30 or better for FYE 2010.

@ RM17.70 ; eps RM1.36 PE = ~13.0X !!! imho low compared to its peers. KLK, IOI, SIME all approx 16X !

at RM17.70, PPB Group market cap = RM21.0billion.
OK, lets look at its intrinsic asset value : refer to its segment biz:
1. Wilmar (18.4% asso), SGX quote 03/05 @ S$6.85; PPB Group share is worth ~RM19.2billion (Wilmar TP ~ S$7.50)
2. Other biz segments eg. flour, cinema, engineering, chemical, livestock, property & others @ book value = ~RM2.9billion
simple maths shows PPB Group market cap worth RM22.1billion; works out to be approx RM18.62 equivalent 13.7X current year EPS !

Balance sheet also healthy ; NTA is RM11.88 (net cash position of RM468million).
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I Think So

Not Likely

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update...
TA shows bullish sentiments, with its accumulation distribution line & MACD signaling a bullish divergence. Its money flow index also indicates an oversold position signaling a buying opportunity. Prices seems to be hugging the lower half of its narrow Bollinger band showing strong support at this level, with possible price breakout beyond its upper band.

Noted substantial shareholders increasing their shareholding since March 2010 :

EPF :
@ Mar 2010 – 94,063,950 shares (7.93%)
@ May 2010 – 99,674,850 shares (8.41%)

AGM set for 19/05, Wednesday and share goes ex-div on 20/05.
My guess, Q1 result will be released on 21/05.
My guesstimate (flour biz taken as status-quo)…
Wilmar released their results a couple of days ago, stating a profit of US$401 mil for Q1 (ie. RM1.3 bil) … PPB share ~ RM240mil.
Sale of sugar biz + tradewind shares brought in RM850mil profit + other biz say approx RM50mil
Q1 - A nice tidy profit sum of approx. +RM1.14bil !!!

Q1 NTA would improve to RM12.88 with a net cash position of +RM1.0bil (after payment of dividend) !!!

There were news indicating that PPB’s 50% owned associate sold a piece of land (o.65 ha) in Jalan Perak KL for approx RM154 mil (ie. RM2200 per sq ft). Guesstimate of original price is approx RM500 per sq ft (bought prior to 1998).
Hence profit ~ RM50 mil towards PPB – probably Q2 !!

On an annualized basis…
FYE 2010 Profit ~ RM2.06bil [(4Q X RM250+RM50) +RM850 +RM50]
EPS ~ RM1.74
NTA ~ RM13.62

@RM20.00, PE~11.5X (assume RM0.85 dividend) DY~4.25%) !!!!

cheers..
WOW... a complete buckaroo.. wilmar tax fraud !!
a RM1.00 price drop !!

no worries, its a buying opportunity !! now you can buy PPB cheaper by RM1.00 !

Seriously, in my humble opinion, there is a serious misunderstanding on this issue, ie. tax refund, especially VAT refunds.. where a manufacturer imports raw materials and pays VAT for it, which is then processed and exported out which entitles them for a VAT refund !

Wilmar statement extract:
“The company is fully confident that its subsidiaries are and have at all times been in full compliance with all relevant Indonesian value-added tax laws,” Wilmar said in a statement yesterday to the Singapore exchange. Its units exported more than $3 billion worth of palm oil in the last three fiscal years, entitling them to claim 10 percent value-added tax paid on the cost of the sales, it said.
Sometimes our so-called analyst are equally ignorant, lacks intellect & brains when you get comments like this from them...

“What is more detrimental is the reputational damage to the group,” an AmResearch Sdn. report said. “We wonder if the Chinese government would start scrutinizing Wilmar’s tax payments and accounts due to the allegations in Indonesia.”

CIMB Investment Bank Bhd. analyst Ivy Ng cut her 12-month target to S$7.85 from S$8.40 “to account for potential weak near-term sentiment” and as the earnings forecast could be reduced by 22 percent in the “worst-case scenario” of the company returning $385 million to the government for tax refunds received in the past three years.

Anyone who have a teeny weenie bit of brains would have done a bit more research before coming out with dumb statements like that... the quality of people have deteriorated down the drains...
First, Indonesia & China have seperate tax regimes.. are their VAT treatment the same ? and many other questions !! and... can you concur the same attitude of both countries tax authorities ??

Seriously..to make such statement is media sensationalising without the benefit of any intellect input !

Similarily, Ivy Ng's statement of worst-case scenario of returning $385mil.... this would NOT happen, as the company would defend its position on the refund no matter what !! In any case, if there is elements of "fraud", there is no case of "returning" but would result into additional tax liabilities arising from fines & penalties !!

Would WILMAR, the biggest palm-oil trader in the world... risk VAT refund fraud issues when they have a much bigger picture biz picture to look at !!

its all a knee-jerk reaction, PPB Group is still fundamentally STRONG !
guess its good that this sort of corrections gets rid of those weak shareholders who perhaps used borrowed funds or lacks insights....

i shall continue to accumulate this stock on every weakness (at least until end-Sept 2010) !!

cheers.
Update...

Sorry.. but looks like the price target is unlikely to be hit by 15.06.2010 !
likely to be by 31 August 2010 !

Market is so jittery and shaky that should wilmar's executive management had gone for a board meeting in bahamas, the politicians and analyst would assume that they are absconding with billions !!
even good corporate earnings is useless to gain market/shareholders confidence.

substantial sharholders continue to increase their shareholdings :
EPF - 100,388,650 shares (8.47%)

RM20.00 by 31.08.2010.
UPDATE @ 09/07

PPB today surpassed its Bollinger upper band RM16.63 to close @ RM16.88 after hitting a high of RM16.92 on a volume of 1.04 million shares.

From the charts, the stochastic, the 14-day RSI & MACD histogram are showing a positive landscape, indicating its current price may challenge its previous high of RM18.40 in near term. Current support is pegged at approximately RM16.50.

Also suspect Company might announce good news sometime in the near future.... perhaps bonus issue ? or Q2 results surpassed expectations ?

substantial sharholders continue to increase their shareholdings :
EPF - 108,630,350 shares (9.16%)
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