KUALA LUMPUR: “Sugar King” Robert Kuok’s PPB Group Bhd can expect “better growth” for its financial year ending Dec 31, 2015 (FY15) as it stands to benefit from 18.3%-owned associate Wilmar International Ltd’s strong start to the year.
“Last week, Wilmar announced its first quarter (ended March 31, 2015) [1QFY15]) results which have substantially increased. I think Wilmar chairman also said he was optimistic about [Wilmar’s] second quarter performance.”
“So, we are almost going into the second half of the year. I won’t say much more than that because we are only an investor in Wilmar. If Wilmar performs well, we will stand to benefit from Wilmar’s performance,” PPB managing director Lim Soon Huat told reporters after the company’s annual general meeting yesterday.
Wilmar, which contributed 67% to PPB’s net profit in FY14, announced last week that its net profit for 1QFY15 jumped 49.1% to US$241.2 million (RM869.65 million), compared with US$161.8 million during the same period a year ago.
But PPB chairman Datuk Oh Siew Nam said there is no guarantee a stronger Wilmar performance would mean the amount of dividends paid by Wilmar to PPB will increase.
“How much they (Wilmar) can give as dividends depends on their own requirements. They may need the money for expansion,” said Oh.
Aside from Wilmar, PPB’s financial performance would be supported by growth in two of its core businesses — flour and feed milling, as well as cinema operations.
Both these segments (flour/feed milling and cinema) will get the bulk of PPB’s RM535 million capital expenditure spending for the next two years.
In particular, RM208 million has been set aside for its flour and feed milling division for the expansion and upgrading of plants and machinery in Malaysia, and investment in the company’s China associates.
PPB said it is constructing a new flour mill with a capacity of 500 tonnes a day in Pasir Gudang, Johor, to improve on its efficiency and capacity. The construction of this mill should be completed by 2017.
Meanwhile, RM283 million has been allocated for its film exhibition and distribution business to open 11 new cinemas and to extend three existing cinemas over the next two years.
For FY15, PPB will open six cinemas, with three new cinemas each in FY2016 and FY2017.
According to Golden Screen Cinemas Sdn Bhd (GSC) chief executive officer Koh Mei Lee, GSC is expected to do “well” thanks to the number of blockbuster films lined up for this year and next.
“Even with the implementation of GST (goods and services tax) in April 2015, we have not seen any setbacks in terms of admissions because we have had movies like The Avengers, and Fast and Furious after that.
“For the rest of the year, we have many more (movies). We expect more admissions to the cinema, and with our rolling expansion, we should be doing well [this year],” said Koh.
Meanwhile, on PBB Group’s property division, Lim said the group’s focus now is on the launch of its mixed development in Puteri Harbour, Johor, next month. The project, which PPB is jointly developing with Kuok Brothers Sdn Bhd and Khazanah Nasional Bhd, has a gross development value of RM1.5 billion.
As for its environmental engineering, waste management and utilities business, PPB said it has an existing order book of RM500 million, of which RM120 million has been completed.
Under this segment, PPB (fundamental: 2; valuation: 0.8) said it plans to participate in larger public and private water and sewage infrastructure projects.
This article first appeared in The Edge Financial Daily, on May 14, 2015.