PPB GROUP BERHAD VALUE EVALUATION

PPB group is a giant conglomerate venturing into the food, property and entertainment industry. This enables the company to ride on a bullish trend and receive less shock when there is a global financial slowdown with their diversification products and services. As Malaysia sole largest private flour miller without much government intervention, PPB group leverage this position and offer cake baking flour series while producing breads out of its own wheat. As there is no middle chain in between extraction and manufacturing, this low expense margin segment turns out to be a profitable venture. Aside of that, frozen food with “Marine” branding is a deluxe picking by households with their exceptional and restaurant suited taste. Compared to other frozen products, Marine raises a sense of enjoyment instead of staple food which specifically targets for higher middle group. Making its way into entertainment field, the group owns Golden Screen Cinema which can be found all over Malaysia. Their standings are further established with the opening of two new cinemas in Sarawak. With the trend of youngsters favouring cinema movie, screening business is never too obsolete which enables the group to continuously enjoy their cash inflow from cinema business. The benefits prolong with the group acquisition of Vietnam’s Galaxy Entertainment where they capture a rising market over there. At the same time, it is also a great sources of collecting advertising revenue where airing time is quite costly and lucrative.

For the bread manufacturing industry, PPB group distribution network is sort of left behind compared to Gardenia. Take into the example of Sabah where there is local bread manufacturer by BTC, Gardenia’s bread is still able to survive and its coverage is wide be it the rural or urban areas. The moderate distribution network can also be reflected through its frozen products where it is only found in certain urban areas where foreign products are also brought in making the competition more crowded. Golden Screen Cinemas are also cornered in a five ways battle with so much theatre operators already in Malaysia. Consumers are able to choose which cinemas to go to despite of having the same movie. Therefore, a lot of marketing expenses and collaborations are needed to attract the respective markets.

Obviously, the operating cash flow for PPB Group is sliding down from years to years. With  extensive expansions for the several years, failing to boost up and even maintain the cash from below reflects that the business is not generating enough cash altogether. Thus, it is not a desirable picking.
STOCK: PPB CODE: 4065