Wilmar - OCBC Investment 2017-02-22: Steadier outlook for the year ahead

Wilmar - OCBC Investment 2017-02-22: Steadier outlook for the year ahead WILMAR INTERNATIONAL LIMITED F34.SI

Wilmar - Steadier outlook for the year ahead

  • Strong 4Q16.
  • Growth opportunities remain.
  • Keeping our view.

Ended the year on a strong note 

  • Wilmar International Limited (WIL) saw a strong 4Q16 with a 27% and 70% increase YoY for revenue and net profit to US$11.9b and US$561m, respectively, driven by better performance across all segments, contribution from associates as well as recognition of deferred tax assets of US$142.1m. 
  • FY16 revenue was up 6.8% to US$41.4b on stronger sales volume, which was largely within expectations. 
  • Net profit was down 5% to US$972.2m while core net profit was also lower by 14% to US$976.6m, mainly due to the S$343.8m loss in Oilseeds & Grains segment in 2Q16. Net profit came in above Bloomberg’s consensus expectations (~US$813m), but was within expectations if the DTA recognition is excluded.

CPO price expected to ease while production set to come back 

  • Tropical Oils segment benefited from higher CPO prices during the quarter. As such, 4Q16 pre-tax profit rose 94% to US$184.3m and FY16 was up 40% to US$689.2m. 
  • Looking ahead, OCBC Treasury Research expects CPO price to be supported above MYR2,700/MT for 1Q17 due to seasonally lower production, while they see an eventual decline in CPO price to MYR2,650/MT by year end as they anticipate ample supplies and weak demand. 
  • Meanwhile, production is expected to come back. In addition, the downstream business should remain supportive to give decent overall margins.

Steadier outlook ahead 

  • Sugar segment’s FY16 pre-tax profit rose 49% to US$125.3m on the back of a season extension for milling activities, but also recorded a US$33.5m impairment charge as management took a conservative view in consideration of the more competitive environment for sugar refining in Australia. 
  • Oilseeds & Grains segment has been seeing stable crushing margins for soybeans, and its Consumer Products offers long term growth potential. 
  • All considered, we have adjusted our estimates and raised our fair value estimate to S$3.70 (based on 14x FY17F P/E) from S$3.18 against a steadier outlook for earnings across segments and better contribution from Associates/JVs as the group seeks to continue tapping on opportunities. 
  • Maintain HOLD at current levels.

Jodie Foo OCBC Investment | http://www.ocbcresearch.com/ 2017-02-22
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 3.70 Up 3.180