Wilmar International - CGS-CIMB Research 2020-11-03: 3 Things To Look Forward To Post YKA Listing


Wilmar International - 3 Things To Look Forward To Post YKA Listing

  • We stay positive on Wilmar as plans to pay a final and special dividend of at least S$0.16/share is to be announced in Feb (div yield of 3.8%).
  • Investors can also look forward to strong 4Q20F earnings, driven by robust crush margins, high CPO price and sugar contributions.
  • Wilmar plans to unlock value potentially via share buyback and/or listing other parts of the group businesses.

Positive takeaways post Wilmar's 3Q results briefing

  • Post the 3Q20 results briefing, we remain positive on Wilmar (SGX:F34) as the group guided for 4Q earnings to remain strong and revealed that final dividends to be announced in Feb 2021 will be no less than S$0.16 per share, inclusive of the special dividend of S$0.065 per share.
  • Wilmar also indicated that it will be looking at the possibility of listing other parts of the group following the successful listing of YKA in its pursuit to unlock value.
  • Wilmar may consider buying back its own shares if it deems the company to be undervalued.
  • Wilmar also mentioned that the listing proceeds from YKA allow it to expedite expansion plans in China, which involve setting up more large scale processing facilities in new locations, raise R&D expenditure and venture further into value-add and complementary products like soya sauce and noodles.

Unlocking value beyond listing of YKA

  • Wilmar shared that it was surprised that Wilmar's share price did not react more positively to the successful listing of YKA on 15 Oct; its 90%-owned YKA now commands a larger market cap of US$42bn than Wilmar’s market cap of US$20bn. The group said that concerns over potential overhang from the ADM placement of Wilmar shares could be a short-term reason but is confident that Wilmar's share price will find its fair value over time.
  • Wilmar said it may consider buying back its own shares if its share price is undervalued. To unlock value, Wilmar says it may consider listing other parts of the group’s businesses, which we viewed positively.

Expect a good set of 4Q earnings

  • Wilmar is cautiously optimistic that its 4Q20F earnings will beat 4Q19 core net profit of US$410m. Over the past ten years, 4Q earnings on average made up 32% of its full-year net profit. The group could also beat its previous record profit of US$1.7bn if it can deliver a final net profit of around US$554m in 4Q20F, based on our estimates (vs. US$501m in 3Q20).
  • We are raising our Wilmar's net profit forecasts for FY20-22F by 20-24% to reflect higher profit margins from consumer products, crushing activities and estates.

Retain ADD as market has yet to fully price in the positives

Ivy NG Lee Fang CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-03
SGX Stock Analyst Report ADD MAINTAIN ADD 5.45 DOWN 5.530