Wilmar International - UOB Kay Hian 2022-01-31: Listing Of Adani Wilmar On The National Stock Exchange Of India

WILMAR INTERNATIONAL LIMITED (SGX:F34)

Wilmar International - Listing Of Adani Wilmar On The National Stock Exchange Of India

Adani Wilmar (AWL) has finalised its IPO price range at Rs218-230 per share. We view this positively to unlock shareholder value by unleashing the true value of its subsidiary. However, we expect the impact from AWL to Wilmar International (SGX:F34) to be marginal as the contribution of AWL is about 5% of Wilmar Group’s earnings as compared with YKA which contributed 60-70%.
We are not expecting any special dividend post listing of AWL. Maintain BUY call on Wilmar International.

Adani Wilmar (AWL) is selling its share at Rs218-230/share for its initial public offering (IPO) on the National Stock Exchange of India (NSE) and Commbay Srock Exchange (BSE). The public issue, comprising fresh equity shares, opened for subscription on 27 Jan 22 and will close today. This will translate into a market capitalisation of Rs283-299b (or US$3.8-4.0b).
Anchor investors subscribed at Rs230/share. AWL has made an allocation of 40,865,217 shares to Anchor investors (AI) at the allocated price of Rs230/share. The government of Singapore and Monetary Authority of Singapore were given a higher allocation of 39.22% and 8.66% respectively from the shares allocated to AIs. There are total of 15 AIs (please refer to table next page for full list of AIs).
List at FY21 enlarges share base P/E of 38-41x vs peers of 40x. Based on the IPO price band of Rs218-230/share, this would translate to a historical P/E of 38-41x P/E FY2021 for AWL. We reckon that the valuation is relatively fair as compared with the 15 stocks under the NSE NIFTY FMCG Index which are trading at an average FY21 P/E of 40x (PE range from 20-85x), while its closer peer Ruchi Soya Industries trades at 28x FY21 P/E. We reckon that the slight premium in valuation as compared with Ruchi Soya is due to its stable profit margin, strong earnings growth and record-proven management.

We view this positively to unlock shareholder value by unleashing the true value of Wilmar International’s subsidiary, AWL. Based on AWL’s financial data and 50% stakes, AWL’s net profit contributions to Wilmar International are estimated at 6-8% for 2020 and 9M21. It is still relatively small compared with Yihai Kerry Arawana (YKA).
We are also not expecting any special dividend after the listing of AWL for Wilmar International’s shareholders. However, the easing of the capital needs from the holding company may lead to higher dividend payout in the future.

Adani Wilmar is a fast-moving consumer goods (FMCG) food company offering most of the essential kitchen in India (source: Nielsen Retail Index – MAT March 2021). “Fortune”, its flagship brand, is the largest selling edible oil brand in India (source: Technopak Report).

We maintain our 2021/22/23 earnings forecast of US$1.71b, US$1.79b and US$1.96b respectively for Wilmar International.
Reiterate China operations and a blended 11x P/E for non-China operations.
See
Despite the short-term concerns that China’s economy is still weak and concerns about COVID-19 restrictions weighing on domestic consumption, we reiterate BUY on Wilmar International for its diversified and integrated business model which has delivered good results performance despite the global uncertainty in 2020 and 2021 amid the COVID-19 pandemic.

Leow Huey Chuen UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-01-31

SGX Stock Analyst Report BUY MAINTAIN BUY 6.000 SAME 6.000