WILMAR INTERNATIONAL LIMITED (SGX:F34)
Wilmar International - Still More Upside Ahead; Reiterate BUY
- Yihai Kerry Arawana’s (YKA) IPO issue price has been set at CNY25.7, implying 31.1x FY19 P/E and a CNY139bn (USD20.6bn) market cap. Comparatively, Wilmar's share price looks much more attractive, as its 90% stake in YKA already accounts for 87% of its market cap, despite the latter’s contribution to its bottomline (c.60%).
- As YKA’s Shenzhen listing draws near, Wilmar's share price is likely to remain supported, with a potential rerating coming from the post-IPO performance of YKA’s share price.
Positive on the YKA IPO.
- We continue to be upbeat on YKA’s share price outlook post-listing, as China’s IPO market remains robust. The 35 new stocks recently listed on the Shenzhen ChiNext Board have recorded an average YTD gain of 161% (range: -5% to 956%). The Street is also positive on YKA’s prospects, and expects an EPS growth of 11-15% pa over FY21-22.
- In addition, we believe there is sufficient investor interest on YKA, as its shares are oversubscribed by 600 times by offline investors, and oversubscribed by 1,750 times by online retail investors.
- Timeline-wise, Wilmar (SGX:F34)’s timetable stated that YKA will publish the issuance results, as well as its updated prospectus this Friday. We expect the listing to happen sometime over the next two weeks.
Optimistic on Wilmar’s 3Q20 earnings.
- The food products and feed & industrial products segments should see a continued strong performance, bolstered by the consumption recovery in China, as well as higher soft oil and soymeal prices in 3Q20.
- While soybean prices have also increased, we believe the group has accumulated adequate beans in its inventory – so we should see a laggard effect on its raw material cost.
- Plantation and sugar milling should also benefit from a seasonal high in 3Q20, as well as improving CPO and sugar prices.
Maintain our SOP-derived Target Price of SGD5.45 for Wilmar
- Our SOP-based Target Price implies 20x FY21F P/E. This is corroborated by our back-of-envelope valuation, using 30x FY21F target P/E for YKA (c.60% of Wilmar’s PATMI) and 12x FY21F target P/E for ex-YKA (c.40% of Wilmar’s PATMI) – which coincidentally arrives at a similar intrinsic value of SGD5.57.
- See Wilmar Share Price; Wilmar Target Price; Wilmar Analyst Reports; Wilmar Dividend History; Wilmar Announcements; Wilmar Latest News.
- Key downside risks to our call include a withdrawal of YKA’s IPO plans, and trade tensions that might disrupt commodity prices.
Juliana Cai
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-10-08
SGX Stock
Analyst Report
5.450
SAME
5.450
