THE film exhibition and distribution segment which is poised to return to the black in late-3Q 2022 or 4Q 2022 has been regarded as one of the four key drivers that prompted UOB Kay Hian Research to upgrade PPB Group Bhd to “buy” (from “sell” previously) with a higher target price of RM18.55 (from RM 15.60).
With most of PPB’s cinemas back to 100% capacity, the research house expects the film exhibition and distribution segment to woo more audiences to return to the cinemas. PPB Group is the owner of Golden Screen Cinemas Sdn Bhd (GSC).
“There are more movies lined up for 2022, with an expected five DC movies, four Marvel movies and many other movies that had been delayed since 2020 are scheduled to be screened in 2H 2022,” observed analysts Leow Huey Chuen and Jacquelyn Yow Hui Li in a recent company update.
In April Bernama cited PPB managing director Lim Soon Huat as saying in the group’s 2021 annual report, that PPB has outlined several development plans for the year such as the GSC reward programme to drive admissions as well as retain and attract new cinemagoers while simultaneously building customer loyalty.
“We are launching eight BIG cinema halls to provide a better immersive experience and opening at least two Happy Food Co outlets during the year,” noted Lim. “GSC also targets to introduce new cinemas in Bintulu, Johor, Kuala Lumpur and Putrajaya with a total of 50 new screens.”
In September 2021, GSC completed the acquisition of 18 cinema assets from MCAT Box Office Sdn Bhd and Reel Entertainment Holdings Sdn Bhd, increasing its domestic market share to more than 50%.
Apart from its cinema business, UOB Kay Hian Research also expects three other key segments to contribute to PPB’s overall margin improvement:
- Margin recovery for the grains and agribusiness segment: Given that wheat is the key raw material for PPB’s grains and agribusiness segment (it accounts for 80%-90% of the cost of sales), the research house expects margin to improve on the back of upward price adjustments and lower raw materials prices (wheat has dropped by 29% since its recent peak in June).
With this, UOB Kay Hian expects this segment to see better margin improvement and healthy sales volume and hence, return to turn black in 3Q 2022 (this segment contributes about 45%-50% to PPB group’s operating profit).
- Consumer products segment to remain stable: The research house also expects higher margin for consumer products, thanks to a better procurement strategy and supply chain management. It expects sales volume to be satisfactory in 2H 2022 as the products are mainly consumer staples.
- Strong contribution from Wilmar International: UOB Kay Hian Research expects PPB’s group core net profit to improve significantly in 2Q 2022-3Q 2022 on the back of strong contribution from Wilmar International with the latter’s net profit increasing 20% in 2Q 2022. Moreover, PPB will also benefit from the appreciation of the Singapore dollar given that Wilmar’s earnings are reported in SGD while PPB’s earnings are in ringgit.
At 9.06am, PPB was up 12 sen or 0.73% to RM16.52 with 1,000 share traded, thus valuing the company at RM23.5 bil. – Aug 11, 2022
