This article first appeared in The Edge Financial Daily on May 16, 2018
KUALA LUMPUR: PPB Group Bhd expects the abolishment of the goods and services tax (GST) as pledged by the Pakatan Harapan government to be positive for the retail sector.
“Theoretically, prices will fall, and the people will be left with more disposable income for cinemas or food. So, retail trade will go up a bit,” said PPB non-executive chairman Tan Sri Oh Siew Nam. But the group itself does not expect to see significant growth in earnings from the policy change as most of its revenue is derived from flour, a zero-rated item, Oh told reporters after the group’s annual general meeting yesterday.
“A 6% change is not a lot,” he said, referring to the increase in disposable income consumers may enjoy.
Consumers may also choose to spend on other items, such as healthcare instead of leisure, limiting spillover benefits for PPB’s film exhibition and distribution segment, under which it records contributions from Golden Screen Cinemas Sdn Bhd.
About 68% of PPB’s revenue is derived from its grain and agribusiness segment, which has suffered from a decline in segmental profit due to an increase in prices of wheat, a key raw material for the group.
PPB managing director Lim Soon Huat said as prices remain elevated, they could stabilise this year as the US and China are likely to come to a compromise on trade terms, which would soften the rise in crop prices.
He added that PPB would maintain its price levels unless costs increase exponentially, following which it would “share the costs with consumers”.
The group has a 16.8% stake in Singapore-based Wilmar International Ltd, which it does not plan to increase any time soon, said Lim.
Following a recent announcement that the group would acquire a 16.8% stake in property developer Hillcrest Gardens Sdn Bhd for RM59 million cash, Lim said PPB is also keeping an eye on opportunities to increase its land bank.
“We believe that there are good opportunities in a depressed market,” he told reporters, adding that the group is well positioned to capitalise on this as it is in a strong financial position with sufficient cash reserves.
No development plans have been made for Hillcrest’s existing 147.78 acres (59.8ha) of land as the acquisition would have to be completed before PPB takes a closer look at its options, he added. The acquisition is targeted to be completed in the second quarter of this year, said PPB chief financial officer Yap Choi Foong.
As for other mergers and acquisitions, Lim said PPB would continue to be open to considering businesses that are synergistic.
Separately, the group’s environmental engineering and utilities segment will see sewage and water treatment services provider ChemQuest Sdn Bhd focus on expanding its business in Malaysia before venturing overseas, said Leong Yew Weng, ChemQuest’s group managing director.
“Our next stop will probably be Indonesia,” Leong said, adding that he is hopeful that the change in Malaysia’s government may present the group with new opportunities.
The basis for this hope is that with Pakatan in power at both the federal and Selangor state levels, there may finally be a resolution to long-standing issues surrounding the state’s water restructuring exercise, he shared with The Edge Financial Daily.
Shares in PPB continued to gain yesterday, recording an increase of 12 sen or 0.6% to close at a record high of RM20.10. The counter has gained 92 sen or 4.83% since its closing at RM19.06 last Friday, after its indirect largest shareholder Robert Kuok Hock Nien was appointed by Prime Minister Tun Dr Mahathir Mohamad to the Council of Eminent Persons on Saturday. Kuok controls a total stake of 51.62% in PPB.