PPB Group’s market capitalization only reflects its stake in Wilmar (18%) and Maybulk (14%) and implies zero value on its core operations in sugar refining, grain trading and film distribution. We are positive on the stock: (1) Recent corporate exercise to dispose MFM, kilang Gula Felda Perlis and 5,797ha land in Chuping Perlis will net the company RM1.3bn (RM1.10/share). (2) Wilmar is a cheaper proxy to rising CPO prices (+51% YTD) vs. Bursa-listed big-cap planters like Sime Darby, IOI and KLK. Wilmar trades at 17x FY10E PE compare to 19-20x for Bursa-listed planters. Assuming Wilmar re-rates to 20x FY10 PE, PPB’s stake in Wilmar will be worth RM18.18/share.
PPB’s share price (+71% YTD) is trading at 13x FY10 PE, a 32% discount to big-cap planters. We value PPB at RM19.50/share based on sum-of-the-parts: (1) stake in Wilmar at RM15.51/share; (2) stake in Maybulk at RM0.37/share, (3) core operations and balance sheet item at RM3.62/share.
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