Wilmar International - OCBC Investment 2021-02-24: FY20 A Strong Year


Wilmar International - FY20 A Strong Year

  • Wilmar's FY20 core PATMI rose 18.3% y-o-y.
  • Highest dividend of S$0.195/share declared since listing.
  • Higher fair value estimate of S$6.16.

Total sales volume grew 10.1% y-o-y on strong demand

  • Wilmar (SGX:F34)’s FY20 revenue rose 18.5% y-o-y to US$50.5b, due to strong volume growth (+10.1% y-o-y), improved commodity prices and consolidation of Goodman Fielder’s results. Core PATMI rose 18.3% to US$1.5b, making up 105% of our full year forecast, broadly in-line with our expectations.
  • A final dividend of S$0.09 per share and a special dividend of S$0.065 per share were declared, bringing Wilmar's total dividend for FY20 to S$0.195 per share (+56% y-o-y). This is the highest dividend declared since listing.

Strong performances across key segments for FY20

  • For Food Products, Wilmar saw strong volume growth of 19.8% in 2H20 due to higher demand for quality food staples and strong recovery in demand from hotels/restaurants/catering (HORECA). As China recovers gradually from COVID-19, we expect the demand from HORECA which is still below the pre-COVID-19 levels to continue its recovery in FY21.
  • For Feed and Industrial Products, volume increased 12% y-o-y driven by higher sales volume in oilseeds and grains, and sugar businesses. The segment’s performance was also boosted by improved crushing margins and activities in 2H20 as China restocks after African Swine Fever.
  • Separately, sales volume for sugar milling operations fell 25.5% y-o-y in 2H20. However, Plantation and Sugar milling’s profit before tax managed to turn from a loss of US$41.3m in FY19 to a profit of US$104.8m in FY20, thanks to firmer CPO and sugar prices last year.

Valuation gap between YKA and Wilmar

  • YKA’s share price rallied ~290% since its listing in Oct 2020. Wilmar’s current market cap is US$25.8b which is trading at a steep discount of ~70% to YKA’s market cap of US$83.4b. We believe Wilmar’s business is undervalued.
  • In terms of valuations, Wilmar is trading at forward P/E of 17x against YKA’s estimated P/E of 66x. Management attributed the valuation gap to lower liquidity in the Singapore stock market as compared to China and dominance of Wilmar’s products in China.
  • See Wilmar Share Price; Wilmar Target Price; Wilmar Analyst Reports; Wilmar Dividend History; Wilmar Announcements; Wilmar Latest News.
  • We believe Wilmar’s valuations are likely to be lifted over time with sustained YKA’s valuations and we remain positive on Wilmar. After adjustments, our fair value estimate for Wilmar increases from S$5.40 to S$6.16.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2021-02-24
SGX Stock Analyst Report BUY MAINTAIN BUY 6.16 UP 5.400