PPB

FROM THE EDGE----the unexpected things can happen to any company/stock no matter how good they are.

PPB continues slide
Written by Surin Murugiah
Thursday, 20 May 2010 09:28

KUALA LUMPUR: PPB GROUP BHD [] extended its losses in early trade Thursday, May 20 and fell 12 sen to RM16.30 with 241,400 shares done as at 9.15am.

On Wednesday, the stock lost 5.79% or RM1.02 to RM16.60, the sharpest decline since Oct 24, 2008 when it fell 6.71%.

It saw RM1.21 billion erased from its market capitalisation after its 18.4% associate company Wilmar International's Indonesian subsidiaries had been reported to be under probe for alleged unlawful value-added tax-restitution claims.

Meanwhile, Wilmar International's stock price fell by 6.9% on Wednesday on tax fraud allegations. After Wednesday's close, the company provided further clarification to SGX on the process of claiming VAT refund, which is very straightforward.

The company also said its internal records in respect of the VAT refund claims vis-a-vis export sales will stand up to scrutiny.

OSK Research in a note Thursday said that besides the announcement to SGX, the company also clarified that its COO Martua Sitorus was not personally under investigation for the tax fraud allegations.

"We believe the market will be relieved as Martua was the person who spearheaded Wilmar's expansion in Indonesia. After (Wednesday's) selldown, Wilmar is trading at under 15 times PE for both FY10 and FY11.

"Should the company be able to sort out the issue, the stock will be a bargain even at these levels. While the stock may still weaken somewhat from here, we believe it is now cheap enough for investors to start nibbling on. We are encouraged by the company's strong stand on the issue."

OSK Research reiterated its buy call on Wilmar with target price of S$7.35.