Wilmar International - OCBC Investment 2020-08-12: All Eyes On Yihai Kerry Arawana IPO

WILMAR INTERNATIONAL LIMITED (SGX:F34)

Wilmar International - All Eyes On Arawana IPO

Wilmar International (SGX:F34)’s 1H20 revenue rose 12% y-o-y to US$22.7b, driven by higher contributions across all key segments. For 1H20, PATMI grew 39% y-o-y to US$611m, representing 52% of initial forecast, within our expectations.
Overall sales volume grew 8% y-o-y on strong consumer products demand despite lower demand from the Hotel/Restaurant/Catering (HORECA).
An interim dividend of 4 S cents per share (+33% y-o-y) was declared.

For Food Products (PBT: +21% y-o-y), Consumer Products (sales volume: +29% y-o-y) remained the key driver which saw strong growth of 40% in revenue, while medium pack and bulk products’ 1H20 revenue fell 9.4% on the back of lower demand from HORECA amid country lockdowns in 1Q20.
For Feed and Industrial Products, PBT surged 104.9% y-o-y to US$370.8m in 1H20, driven by strong recovery in Oilseeds & Grains business due to the recovery from the ASF outbreak in China.
Separately, Plantation and Sugar milling reported lower losses before tax of US$82.9m in 1H20, as compared to losses of US$103.5m in 1H19, on the back of improved CPO prices.

Wilmar International has submitted an updated prospectus to the China Securities Regulatory Commission (CSRC) for final registration approval for listing. Management expects the IPO to be approved in 3Q20 and potential listing of YKA in second half of September.
China announced IPO reforms for Shenzhen’s start-up board ChiNext. Under the reforms, valuation cap will be removed and IPO price will be decided by the market. Management shared that the average P/E multiple for its peers’ listing on Shenzhen Stock Exchange is ~38x P/E.
We continue to like Wilmar International for the diversification of its products and strong penetration in China. While the strong growth in Consumer Products is likely to taper off in 2H after countries exit from lockdowns, the recovery in demand from HORECA, improved crush margins and CPO prices could provide some buffer.
YKA IPO remains the key catalyst for Wilmar International and we anticipate a special dividend post IPO. We attach a higher P/E ratio of 25x to Wilmar International’s oilseeds & grains segment (YKA’s main business). After adjustments, our fair values estimate increases from S$4.54 to S$5.40.
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/ 2020-08-12

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