Wilmar International - OCBC Investment 2015-12-07: “Satisfactory” performance may extend into 2016

Wilmar International - OCBC Investment 2015-12-07: 'Satisfactory' performance may extend into 2016' 4Q15 Showing
WILMAR INTERNATIONAL LIMITED F34.SI 

“Satisfactory” performance may extend into 2016 

 Underlying performance “satisfactory” 
 Still upbeat about 4Q 
 Buy on dips below S$2.90 


Keeps modestly upbeat outlook for 4Q15 

  • Wilmar International Limited (WIL) has kept its fairly optimistic outlook for 4Q15, saying it will be “satisfactory”, and it could possibly extend into 2016, given that it has seen signs of stability in its China crushing business. 
  • WIL further expects refining and downstream product margins for the Tropical Oils business to 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 

  • Nevertheless, management is mindful that the overall commodities sector could continue to face headwinds over the medium term, citing the potential weather disruptions to supply and even demand. But 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. 

Outlook for Africa still positive 

  • And in the longer term, WIL believes that Africa has great potential for agricultural development and a consumer market, given that the continent still has more than 60% of the world’s unutilized arable land, low per capita consumption and a young and rapidly growing population. 
  • As WIL has invested significant financial and human resources in Africa (undertaking long-gestation projects such as plantations, manufacturing plants and establishing branded consumer products), it believes that it can see substantial rewards (ROIs to likely exceed 20%) in the medium to long term. 

Maintain BUY with S$3.27 fair value 

  • No doubt that the commodities market will continue to remain volatile, and we expect WIL to also see fluctuations in its share price, but we believe that any sell-down could present a good buying opportunity, especially below S$2.90. 
  • We maintain our BUY and S$3.27 fair value on WIL. 


Carey Wong CFA OCBC Securities | http://www.ocbcresearch.com/ 2015-12-07
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 3.27 same 3.27


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