Wilmar International - Maybank Research 2022-10-10: ESG Disclosures Good, Near-Term Catalysts Few.

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WILMAR INTERNATIONAL LIMITED (SGX:F34)

Wilmar International - ESG Disclosures Good, Near-Term Catalysts Few.

• Under our enhanced ESG 2.0 review, Wilmar (SGX:F34) scores an above average 54.
• Wilmar’s disclosure levels are strong and its policies on emissions, human rights, stakeholder engagement etc., are proactive and follow global best practices.Improved disclosures in Scope 3 emissions as well as a higher proportion of diversity and independence at Board level could drive an improved score in our view.
• In the meantime, weakening palm oil prices, extreme commodity price volatility and prolonged Chinese lockdowns could affect margins and volumes going forward.

High levels of ESG disclosures

• Wilmar’s quantitative, qualitative and targets based disclosures are strong in terms of breadth and depth. The Group has had a clear ‘No Deforestation, No Peat, No Exploitation (NDPE)’ policy since 2013 and is amongst the first in the industry to publish a NDPE Implementation Framework that enables consistent measurements of NDPE commitments. It has also enhanced its Human Rights Framework.
• Wilmar operates in industry segments that attract significant attention from multiple stakeholders given large exposures to natural resources, emissions and activity in emerging economies. Operating and reputational risks are high. We believe its proactive transparency in disclosures provides some offset to these risks, especially compared to peers.

Scope 3, diversity could drive a better score

• Wilmar currently does not disclose Scope 3 emissions, which we think is critical for improved sector transparency. The Group claims it is currently mapping this and has targeted end-2022 for completion. Improved disclosure here could drive a higher score, in our view.
• At the same time, we note Board female representation is just 15% vs 27% for US-listed ADM (ADM US) and board independence is low (50% independent directors vs 91% ADM). Improvements here could also substantially enhance Wilmar’s ESG score, in our view.

Limited catalysts near term. Maintain HOLD

• See
  • Wilmar's Share Price,
  • Wilmar's Target Price,
  • Wilmar's Analyst Reports,
  • Wilmar's Dividend History,
  • Wilmar's Announcements,
  • Wilmar's Latest News.
• We estimate 70% of Wilmar’s 1H22 y-o-y PBT growth was from higher CPO prices in the Plantations & Sugar Milling segment. Currently, CPO prices have retraced 53% from its peak. Volumes for its downstream consumer and wholesale segments face downside due to prolonged lockdowns in China as well as inflation and recession risks.
• Further, extreme commodity price volatility raises uncertainty for trading income as well as weaker margins in the upcoming 3Q22 results of Wilmar which is due on 28 Oct. (See SGX listed companies' earnings calendar)
• Maintain HOLD rating on Wilmar.

Thilan Wickramasinghe Maybank Research | https://www.maybank-ke.com.sg/ 2022-10-10

SGX Stock Analyst Report HOLD MAINTAIN HOLD 4.470 SAME 4.470