Wilmar International - CGS-CIMB Research 2020-10-30: Record 3Q Earnings & Special Dividend


Wilmar International - Record 3Q Earnings & Special Dividend

  • Wilmar posted a record-breaking 3Q core earnings, beating expectations.
  • It also announced a special dividend (approx. 15% of YKA IPO proceeds).
  • The group said results for the rest of the year are expected to be good.
  • Reiterate ADD with unchanged target price.

Record 3Q earnings and special dividends announcement

  • Wilmar (SGX:F34) posted a 20% y-o-y/52% q-o-q rise in its 3Q20 core net profit to US$501m, despite the lingering impact of COVID-19 in some of its markets. This brings its 9M20 net profit to US$1.14bn (+34.4% y-o-y), which is above our expectation as it makes up 87% of our and 97% of consensus full-year projections.
  • Over the past ten years, Wilmar's 9M core net profit has on average made up 68% of its full-year core net profit. The reported net profit rose at a faster rate of 20% y-o-y due to non-operating gains from investment activities.
  • Wilmar also announced a special dividend of approximately 15% of the total IPO proceeds of US$2.06bn to be declared in Feb 2021. This is to commemorate the successful listing of YKA on 15 Oct 2020 on the Shenzhen Stock Exchange ChiNext Board. We estimate this could result in a special dividend allocation of US$309m (S$420m), or S$0.065 per share.

Key highlights from Wilmar's 3Q20 results

  • We gathered that all core segments of Wilmar did better y-o-y, both in terms of revenue and profit in 3Q20. The group saw strong demand for its food products and recorded higher crushing activities as African Swine Fever (ASF) eased in China. Both its plantation and sugar milling segments benefitted from higher selling prices achieved for CPO and sugar in 3Q20.
  • Wilmar also highlighted that it enjoyed robust tropical oil and sugar refining margins in 3Q20, which we suspect could be due to its timely purchase of raw materials. We gathered that its associates and joint ventures, particularly from India and Africa, also did well.
  • Wilmar posted a 15.9% y-o-y increase in sales volume for food products to 7.4m tonnes in 3Q20 due to strong volume growth for sugar and flour products and recovery in sales for medium pack and bulk food products post easing of lockdown measures. The 16.1% jump in sales volumes for feed and industrial products was due to strong sugar merchandising and high soybean crush activities.

Expect to deliver another good set of earnings in 4Q20

  • Wilmar expects its results for the rest of the year to be good. The group expects to benefit from higher sales volumes in Asian countries where lockdown measures have eased, better sales volumes from China, thanks to a rebound in the economy, expectations that CPO prices will stay firm going into 2021, satisfactory processing margin for tropical oils and oilseeds crush margin and lastly, better sugar operations due to strong white sugar premium and recovering sugar prices.
  • We maintain our SOP-based Target Price and ADD rating for Wilmar. We keep our earnings forecasts pending its analyst briefing.
  • See Wilmar Share Price; Wilmar Target Price; Wilmar Analyst Reports; Wilmar Dividend History; Wilmar Announcements; Wilmar Latest News.
  • Key catalysts are better-than-expected 4Q earnings, and rising interest in Wilmar as a cheaper and more liquid entry into YKA.
  • Key risks to our call are share overhang from earlier placement and weaker earnings.

Ivy NG Lee Fang CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-10-30
SGX Stock Analyst Report ADD MAINTAIN ADD 5.530 SAME 5.530