PPB faces higher risk premium after Wilmar’s US$729m deposit in Indonesia case
KUALA LUMPUR (June 18): Investors will demand a higher risk premium for PPB Group Bhd (KL:PPB) after associate and main profit contributor Wilmar International Ltd was charged by Indonesia’s Attorney General Office (AGO), according to Kenanga Research.
Wilmar denies any wrongdoing after being charged in April over an alleged corruption conspiracy, and has placed a US$729 million (RM3.1 billion) security deposit with the AGO pending a Supreme Court decision.
“We believe this development is likely to raise the risk premium for the group, and could pose an overhang so long as it is not resolved given that Indonesia accounts for about 10% of its business,” said Kenanga in a note on Wednesday.
Kenanga noted that the security deposit will be forfeited if the Supreme Court rules against Wilmar. Otherwise, the security deposit will be refunded to Wilmar if the Supreme Court upholds the decision of the Central Jakarta Court.
Kenanga estimated PPB’s share of the deposit would be about RM600 million or 42 sen per share.
As such, while the house is maintaining PPB’s outlook for the financial year ending Dec 31, 2025 (FY2025) and FY2026, but downgraded its target price for PPB from RM15.00 to RM10.50, which implies a 0.6 times price-to-book value and eight times FY2026 price-earnings ratio.
It also cut its ‘outperform’ call to ‘market perform’ on the stock, adding that it will reassess its valuations when there is greater clarity regarding the case.
PPB shares shed four sen or 0.4% to RM10.72, valuing the group at RM15.3 billion, while Wilmar shed 11 cent or 3.7% to S$2.90 (RM9.58) in early Wednesday trade, translating into a market capitalisation of S$18.2 billion.
In June 2023, Indonesia’s AGO named three palm oil companies involved in corruption for conspiring with top Indonesian trade office to skirt palm oil export restrictions in 2022.
Wilmar was one of the three companies reported along with Permata Hijau Group and Musim Mas.
“At the time, Wilmar indicated that no official charges had been made against any companies in the group, [and it] was thus seeking more details over the press reports,” said Kenanga.
In March 2025, all three parties were acquitted by the Central Jakarta Court, but a month later, four judges and two lawyers were arrested by the Indonesian AGO. An employee of Wilmar was also reported to have been arrested.
However, on April 14, in statement to the Singapore Exchange (SGX), Wilmar indicated: “To the best of our knowledge, investigations so far have not involved the Wilmar group or any of its employees, but we will assist in any investigation if we are called upon.”
Wilmar further clarified in the same statement that “we believe we are not guilty of the charges as our actions during that period to increase the supply of palm oil to the market, despite the additional cost incurred, was intended to help the government improve domestic supplies and reduce prices”.
In a fresh statement on Tuesday to the SGX, Wilmar highlighted that the AGO did charge five of its subsidiaries in April for corruption between July and December 2021 and the AGO is appealing against the decision of the Central Jakarta Court to the Indonesian Supreme Court.
The AGO also requested the five subsidiaries to demonstrate their belief in the Indonesian judicial system and their good faith and innocence by placing a security deposit of 11,880,351,802,699 rupiah (US$729 million) with the AGO for this matter.
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