Wilmar International - OCBC Investment 2020-02-24: Good Set Of Results; Record Dividend Since Listing


Wilmar International - Good Set Of Results; Record Dividend Since Listing

  • Wilmar’s FY19 PATMI rose 10.2% y-o-y.
  • Potential delay in IPO to 3Q20.
  • Higher Fair Value estimate of S$4.64.

FY19 results met our expectations

  • Wilmar International (SGX:F34)’s 4Q19 overall sales volume grew 1.3% y-o-y, driven by more consumer products and sugar merchandising activities while revenue was up 0.5% y-o-y to US$11.3b due to lower commodity prices.
  • 4Q19 PATMI increased by 122.3% y-o-y to US$438.4m, boosted by strong Tropical Oils, and Oilseeds & Grains performances, as well as the absence of impairment loss from Sugar segment, partially offset by lower contributions from associates and joint ventures.
  • For FY19, Wilmar International's PATMI rose 10.2% to US$1.3b, making up 102% of full year forecast, within our expectations.
  • A final dividend of 9.5 S cents per share (+36% y-o-y) was declared, bringing the total dividend for FY19 to 12.5 S cents per share (+19% y-o-y). This is the highest dividend declared since listing. See Wilmar Dividend History.

Stronger performances across key business segments

  • Wilmar International continued to report strong performances across its key business segments this quarter except JVs & associates (PBT: -44% y-o-y): Tropical Oils (PBT: +114% y-o-y), Oilseeds and Grains (O&G) (PBT: +61% y-o-y), as well as Sugar (PBT: +92% y-o-y).
  • Tropical Oils’ upstream business – Plantation saw some improvement in 4Q19, due to higher palm oil prices which led to higher fair value gains of biological assets. Sales volume in the mid and down-stream Manufacturing and Merchandising business was marginally down by 0.9% y-o-y while downstream processing margins continued to improve.
  • For O&G segment, Consumer Products (sales volume: +10.3% y-o-y) remained the key driver. The strong performance in O&G segment was also driven by higher demand for rice and flour and improvement in crush margins in 4Q19. However, the outbreak of COVID-19 is likely to weigh on feed oilseed demand in the near term given lower consumption of meat, delaying the recovery of the swine herd.
  • Separately, Sugar’s losses before tax narrowed from US$116.7m to US$9.7m in 4Q19, boosted by higher sales volume (+11% y-o-y), the absence of a US$138.6m impairment loss in Australia’s milling operations and better performance from the refining business.

No major impact from COVID-19

  • In light of COVID-19, management disclosed that they have not experienced any major disruptions to their business and supply chains in China given Wilmar International’s exposure to China is mainly in the food products business and their well distributed nationwide plants in China.
  • 90% of Wilmar International’s operations in China have restarted after the CNY holiday and the government has been supportive to food suppliers to ensure there is sufficient food staples supply.
  • In terms of sales volume, management shared that higher margin consumer packs e.g. rice and flour rose more than doubled since the outbreak while lower margin bulk purchase from restaurants declined.
  • The proposed YKA IPO is on track but is likely to face a slight delay due to COVID-19. We expect the listing date likely to be in 3QFY20 and anticipate a special dividend post IPO.
  • After adjustments, our fair value increases from S$4.26 to S$4.64.
  • See Wilmar Share Price; Wilmar Target Price; Wilmar Analyst Reports; Wilmar Dividend History; Wilmar Announcements; Wilmar Latest News.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-02-24
SGX Stock Analyst Report BUY MAINTAIN BUY 4.64 UP 4.260