Wilmar International - UOB Kay Hian 2016-02-19: 2015 Results Within Expectation

Wilmar International - UOB Kay Hian 2016-02-19: 2015 Results Within Expectation WILMAR INTERNATIONAL LIMITED F34.SI 

Wilmar International (WIL SP) 2015: Results Within Expectation 

  • Wilmar’s 2015 results came in within expectations, supported by a strong performance from its oilseeds & grains division. 
  • The tropical oils division’s performance remains subdued due to low palm oil prices. 
  • Despite the yoy decline in the sugar division’s PBT, we think this set of results is good, given that peers in the sugar business had suffered losses. 
  • Maintain BUY. Target price: S$3.60. 


RESULTS 


• Results within expectations. 

  • Wilmar International (Wilmar) reported a core net profit of US$350m (-2.4% qoq, -5.1% yoy) for 4Q15 and US$1,166.4m (-4.4% yoy) for 2015. The results came in within our expectation. For 2015, the weak performance of the tropical oils and sugar divisions were offset by the better performance from the oilseeds and grains division. 

• Remarkable growth from oilseeds and grains division. 

  • Although Wilmar’s PBT registered a drop of 32.6% qoq in 4Q15, the oilseeds and grains division still posted 98.0% growth in PBT for 2015. This was driven by record-high sales volume and better margins from a positive soybean crushing margin as well as high sales volume from the consumer products business. For 2015, sales volumes in the manufacturing and consumer product segments increased by 19.5% yoy and 12.5% yoy, respectively. 


STOCK IMPACT 


• Tropical oils division performance remains weak. 

  • For 2015, PBT declined 43.7% yoy due to lower contributions from both the plantation and manufacturing divisions. The plantation business reported an improvement in production yield in 4Q15, but still suffered from the low crude palm oil (CPO) prices. 
  • Moreover, the weak demand in the downstream business continued to suppress this segment’s performance. 
  • Meanwhile, earnings from the biodiesel contract awarded by Pertamina are yet to kick in. Thus, we are expecting a better performance from this division in 2016. 

• Strong performance from sugar division. 

  • Strong sales volume growth mitigated the impact of the lower margins. Despite the yoy PBT decline, we think this division posted a comparatively good set of results vs loss-making peers in the sugar business. 

• Proposed a final tax exempt dividend of S$0.055 per share, 

  • including the interim dividend of S$0.025/share. The total dividend paid and proposed for 2015 is S$0.08 per share (2014: S$0.075/share). 


EARNINGS REVISION/RISK 

  • We have fine-tuned our earnings forecasts and raised our 2016-17 earnings forecasts marginally by 0.6% and 1.1% respectively due to the higher base in oilseeds and grains and sugar divisions’ sales volumes. 
  • We are now expecting an EPS of 20.8 US cents and 22.2 US cents for 2016-17F respectively. 


VALUATION/RECOMMENDATION 


• Maintain BUY and SOTP-based target price of S$3.60. 

  • This translates into a blended 2016F PE of 12.8x. More updates and views on outlook will follow after the analyst briefing today. 


SHARE PRICE CATALYST 

  • Consolidation of soybean crushers could lead to better margins. 
  • Weather-induced commodities price hike. 
  • Full implementation of the biodiesel mandates globally could lead to better demand for biodiesel (Wilmar is the world’s largest palm biodiesel producer).



Singapore Research Team UOB Kay Hian | http://research.uobkayhian.com/ 2016-02-19
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 3.60 Same 3.60


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