CONSUMER PPB GROUP (PEP MK, PEPT.KL) 11 Dec 2020 Proxy to recovery in consumer sector Company report HOLD Gan Huey Ling, CFA (Initiation)
[email protected] 03 2036 2305 Rationale for report: Initiation Investment Highlights Price RM18.74 Fair Value RM20.30 52-week High/Low RM19.96/RM15.00 We initiate coverage on PPB Group with a HOLD recommendation and fair value of RM20.30/share. Our fair Key Changes value of RM20.30/share for PPB is based on an FY21F PE Fair value Initiation of 22x. Although we like PPB for its sound fundamentals, EPS Initiation we believe that the group’s PE valuations are fair. YE to Dec FY19 FY20E FY21F FY22F Our PE assumption of 22x for PPB is 15% lower than the Revenue (RMmil) 4,683.8 3,952.6 4,492.0 4,691.0 FY21F PEs of 25x to 27x of some of the larger consumer Net profit (RMmil) 1,152.6 1,239.8 1,310.8 1,404.1 companies in Malaysia (Exhibit 1). We have applied a EPS (sen) 81.0 87.1 92.1 98.7 discount as PPB’s consumer operations are smaller than EPS growth (%) 7.2 7.6 5.7 7.1 the likes of F&N Holdings and Dutch Lady Milk Industries. Consensus net (RMmil) 0.0 1,152.0 1,291.0 1,345.0 DPS (sen) 31.0 33.0 34.0 35.0 PE (x) 23.1 21.5 20.3 19.0 We forecast PPB’s gross DPS to increase to 33.0 sen in EV/EBITDA (x) 58.8 78.9 55.8 51.2 FY20E from 31.0 sen in FY19 in line with the rise in the Div yield (%) 1.7 1.8 1.8 1.9 group’s net profit.