WILMAR INTERNATIONAL LIMITED
F34.SI
Wilmar - China Operations IPO Back On The Cards
- Wilmar’s 1Q17 core PATMI of USD313m (+40% YoY) was in line with our estimates. It was mainly driven by a strong performance in the tropical oils and soybean crushing businesses.
- Moving forward, we believe that contribution from tropical oils would fall on lower CPO prices. This would however be offset by the stable soybean crush margins.
- Management is once again contemplating on the listing of its China operations. Should this goes through, it would be positive on its share price.
- We maintain NEUTRAL at the moment with an unchanged TP of SGD3.62 (4% upside).
Hail to the soybeans.
- We believe Wilmar International’s (Wilmar) China soybean crushing business did extremely well in 1Q17 as its total oilseeds and grains processing business (soybean crushing and consumer pack) delivered 27% YoY growth in pretax profit despite a sharp drop in consumer pack volumes (-17% YoY) and marginal increase in soybean crushed volumes (+4% YoY).
- This is in line with our expectations as we believe lower soybean prices would translate into higher crushing margins as highlighted in our previous report Wilmar : Positives And Negatives From Bumper Soybean Crops.
- Although soybean prices have crept up since April to USD9.65/bushel from USD9.35/bushel, we believe that the current prices remain low enough for the company to generate a positive and stable crush margin in 2Q17.
Consumer pack affected by the early Chinese New Year.
- Consumer pack volumes fell 17% during 1Q17. Management attributed this to the early Chinese New Year this year. We expect the consumer pack performance to normalised from 2Q17 onwards.
- We also note that the flour business continued to show positive growth.
Second attempt at China IPO.
- Separate listing of its China operations is once again back on the cards. Considering the high multiples of China companies, we believe a separate listing is positive to the share price.
- We also think this is a good time for a separate listing given the following factors:
- Turnaround of soybean crush margins given the low commodity prices;
- A steadily growing consumer pack business with positive contribution from flour;
- China’s plan to make it easier for overseas companies to list;
- National Development and Reform Commission’s (NDRC) lifting of the restriction for foreign investment in the oilseeds industry.
Tropical oils to be affected by lower CPO prices from here on.
- 1Q17’s tropical oil pretax profit grew 20% YoY. Since CPO prices began falling in mid- Feb 2017, we believe this segment would show weaker results in 2Q17.
- Nevertheless, we think this would be offset by better margins in the soybean business.
Maintain NEUTRAL and a SOP-derived SGD3.62 TP.
- We keep our forecasts and TP unchanged at the moment. There would be an analyst briefing on 12 May 2017.
- We await a further update of its plans to list the China operations.
Juliana Cai CFA
RHB Invest
|
http://www.rhbinvest.com.sg/
2017-05-12
RHB Invest
SGX Stock
Analyst Report
3.620
Same
3.620
