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3 Things To Know About PPB Group Bhd

One of the largest conglomerates in Bursa Malaysia, Malaysia’s stock market, is PPB Group Bhd (KLSE:4065.KL).

It has a market capitalisation of about RM19.0 billion (that’s around S$6.3 billion) and is the main investment vehicle for the richest man in Malaysia, Robert Kuok. Currently, the Kuok group owns more than 51% of PPB Group.

Here are three things investors may want to know about the massive PPB Group.

The main source of its earnings

One of the more interesting features of PPB Group is that the main bulk of its earnings actually come from its investment in Singapore-listed Wilmar International Limited (SGX: F34), despite it having multiple businesses spanning agriculture, consumer products, film exhibition and distribution, property and more.

As of 9 March 2016, PPB Group owns 18.55% of Wilmar, which makes the former the largest shareholder of the latter.

Wilmar, which is a constituent of Singapore’s stock market benchmark the Straits Times Index (SGX: ^STI), contributed more than 75% to PPB Group’s overall net income in 2015. In this sense, PPB Group can even be simply seen as a proxy for Wilmar.

Valuation comparison between PPB Group and Wilmar

Given its huge dependence on Wilmar, it’s interesting to compare the valuation of PPB Group with that of Wilmar’s.

Right now, Wilmar is trading at around 22 times trailing earnings and offers a 2.5% dividend yield. Meanwhile, PPB Group has a trailing PE ratio of 24 and offers a dividend yield of just 1.6%. In terms of their price-to-tangible book ratios, Wilmar is trading at 1.5 while PPB Group is at 1.

Balance sheet strength

Unlike Wilmar, PPB Group has a very strong balance sheet. At the end of June 2016, PPB Group has a net cash position of RM792.0 million (Wilmar is in a net debt position).

There are also recent news reports that PPB Group might be close to selling off its stake in Golden Screen Cinema, the largest cinema chain in Southeast Asia. The sale, if it goes through, could generate more than RM2.0 billion in proceeds, which can further strengthen PPB Group’s balance sheet. In terms of financial strength, PPB Group is one strong conglomerate.

 Foolish Summary

PPB Group has numerous businesses, both in Malaysia and beyond. But, given its huge investment in Wilmar, the Singapore-listed associate still contributes the bulk of the earnings for the group. This is likely to continue to be the case going forward.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any companies mentioned.