KUALA LUMPUR (Dec 26): While PPB Group Bhd’s financial earnings may not be materially affected by the RM43 million penalty imposed by the Malaysia Competition Commission (MyCC) for the group's involvement in price fixing, its reputation may suffer a short-term setback, according to Kenanga Research.
In a note on Tuesday, the research house maintained its ‘outperform’ rating on PPB, as it said the group’s long-term business strategy and prospects were intact, and its valuation was reasonable with earnings expected to recover from the financial year 2024 (FY2024) onwards.
However, the research house has revised PPB’s target price from RM19.30 to RM18.40 based on FY2024 forecast core earnings per share (CEPS) at 16 times price-earnings ratio (PER), which is in line with the ratings of other larger integrated players.
“The overall investment merits for PPB remains intact, namely (1) strong market position in consumer essentials such as flour, feed, ready-to-eat meals as well as mass consumer entertainment in Southeast Asia, (ii) integrated exposure into oil palm and sugar, from upstream production to selling, distributing and branding consumer cooking oils and sugar products in China, Southeast Asia and India via Wilmar International Ltd, (iii) strong balance sheet, and (iv) an expected earnings recovery from FY2024 onwards,” Kenanga Research added.
On Dec 22, FFM Bhd, an 80%-owned subsidiary of PBB, was among the five feed millers that were found to have infringed the Competition Act 2010 by entering into anti-competitive agreements or concerted practices to raise the prices of poultry feed from early 2020 to mid-2022.
FFM still views the decision as without merit and may consider challenging MyCC’s decision.
At the time of writing on Tuesday, PPB shares remain unchanged from its last closing price on Friday at RM14.70. Its market capitalisation stood at RM20.19 billion.