PPB Group's Wilmar Subsidiaries Charged in Indonesia Corruption Case

PPB Group Bhd's associate company, Wilmar International, has been charged by Indonesia's Attorney General's Office, sparking concerns about a potential risk premium for PPB investors. Wilmar has denied wrongdoing and placed a $729ml security deposit pending a Supreme Court decision. Kenanga Research has downgraded PPB's target price to RM10.50 and changed its call to "market perform" from "outperform".

Investors are likely to demand a higher risk premium for PPB Group Bhd (KL:PPB) after its associate company, Wilmar International Ltd, was charged by Indonesia's Attorney General's Office (AGO) [1]. Wilmar has denied any wrongdoing and has placed a US$729 million (RM3.1 billion) security deposit with the AGO pending a Supreme Court decision [1].

Kenanga Research, in a recent note, stated that this development is likely to raise the risk premium for PPB Group and could pose an overhang so long as the case remains unresolved. Indonesia accounts for approximately 10% of PPB's business [1]. The security deposit will be forfeited if the Supreme Court rules against Wilmar; otherwise, it will be refunded [1].

PPB's share of the deposit is estimated to be about RM600 million or 42 sen per share [1]. While PPB maintains its outlook for FY2025 and FY2026, Kenanga has downgraded its target price for PPB from RM15.00 to RM10.50. This represents a 0.6 times price-to-book value and an eight times FY2026 price-earnings ratio [1]. Kenanga has also cut its 'outperform' call to 'market perform' on the stock, indicating that it will reassess its valuations when there is greater clarity regarding the case [1].

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 [1].

In June 2023, Indonesia's AGO named three palm oil companies involved in corruption for conspiring with top Indonesian trade offices to skirt palm oil export restrictions in 2022. Wilmar was one of the three companies reported along with Permata Hijau Group and Musim Mas [1]. 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 [1].

Wilmar's subsidiaries were charged in April for corruption between July and December 2021. Wilmar has stated that it believes it is not guilty of the charges and that its actions were intended to help the government improve domestic supplies and reduce prices [1]. The AGO is appealing the decision of the Central Jakarta Court to the Indonesian Supreme Court [1].

References:
[1] https://theedgemalaysia.com/node/759398
[2] https://www.thestar.com.my/business/business-news/2025/06/19/ppb-risk-premium-higher-amid-legal-case-in-indonesia