Wilmar International - OCBC Investment 2015-11-12: Expect 'Satisfactory' 4Q15 Showing

Wilmar International - OCBC Investment 2015-11-12: Expect 'Satisfactory' 4Q15 Showing
WILMAR INTERNATIONAL LIMITED F34.SI 

Wilmar International - EXPECTS "SATISFACTORY" 4Q15 SHOWING 

 Underlying performance “satisfactory” 
 Still upbeat about 4Q 
 Buy on dips below S$3 


3Q15 affected by MTM losses 

  • Wilmar International Limited (WIL) reported a 7.6% YoY slide in revenue to US$10,649.3m, mainly due to lower commodity prices; this mainly affected its Tropical Oils business, which saw a revenue drop of 22%; but management noted that its Oilseeds & Grains segment turned in a strong performance in the quarter, despite the slowdown in China. 
  • Reported net profit tumbled 34.7% to US$275.9m, mainly due to MTM (marked to market) losses of US$78.9m arising from its investment securities. But excluding these and other one-off items, core earnings would have come in around US$359.0m, down a smaller 16.5%. 
  • 9M15 revenue fell 9.2% to US$29,345.5m, meeting 69% of our full-year forecast, while reported net profit slipped 4.8% to US$718.9m; but core earnings rose 1.1% to US$816.0m, or about 70% of our FY15 estimate. 

Keeps modestly upbeat outlook for 4Q15 

  • Going forward, management remains optimistic that 4Q15 performance will be "satisfactory". In particular, WIL believes refining and downstream product margins for Tropical Oils business should improve with the biodiesel mandate in Indonesia; also expects the recent rise in CPO prices to improve Plantation margins. 
  • In addition, it notes that its Sugar milling segment is expected to benefit from the recent surge in sugar prices on the back of an anticipated sugar deficit in the coming year. 
  • Lastly, it expects the satisfactory performance of Oilseeds and Grains segment to continue. 

Keeping an eye out on more M&As 

  • While management notes that the overall commodities sector could continue to face headwinds over the medium term, WIL remains upbeat about the agricultural sector, citing the growth of the swelling middle class here in Asia. 
  • And with its ample war chest, WIL says it will be keeping an eye out for bargain buys, particularly if these targets can strengthen its value proposition and broaden its product range. 

Maintain BUY with new S$3.27 FV 

  • Weaker headline numbers could cause a sell-off, but we believe that the fundamentals remain relatively sound; hence, a dip below S$3 presents a buying opportunity. 
  • We are maintaining our BUY on the stock with a new S$3.27 fair value (now based on 12x FY16F EPS versus blended previously).


Carey Wong CFA OCBC Securities | http://www.ocbcresearch.com/ 2015-11-12
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 3.27 Up 3.17


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