Price Target: 12 months S$3.53 (Prev S$3.46)
Lacking near-term catalysts
• Cuts in soybean oil and palm oil prices reduce Oilseeds & Grains M&P, Plantations and Consumer pretax
• But Palm & Lauric M&P pretax margin is raised on better-than-expected YTD performance
• Beneficiary of Indonesia’s higher biodiesel mandatory blend
• HOLD for 8% upside; collect on weakness
Adjusting M&P margins. We cut FY13F/14F/15F soybean oil prices by 3%/8%/10%, as higher rapeseed and sunflower oil supplies are expected to weigh in on soybean prices. Holding crush margin percentage unchanged, FY13F-15F Oilseeds & Grains M&P segment should contribute 1-4% lower than our previous expectations. This would be mitigated by 2-6% higher Palm & Lauric M&P pretax margins, given stronger-than-expected YTD contributions from oleochemicals and biodiesel. All-in, we left Wilmar’s FY13F/14F/15F earnings largely unchanged.
Strong Palm & Lauric M&P margin to continue. YTD, Wilmar delivered stronger-than-expected Palm & Lauric M&P margin of 4.6%, thanks to its fully integrated business model. We raised FY13F-15F Palm & Lauric M&P pretax margin to 3.7% from 3.4% previously to reflect this. We still expect some pressure on refining margins in 4Q13.
Beneficiary to Indonesia’s higher biodiesel mandate. Wilmar’s large biodiesel capacity should put the group at the forefront of Pertamina’s recent open tender for 6.6m kl of biodiesel purchases over the next two years. We expect the group to operate at full capacity over the same period, but we assume no capex outlay for any intended biodiesel capacity increase.
HOLD for 8% upside. We see no near-term catalysts, given lower expected M&P margins in 4Q13. Based on our revised forecasts, the counter is now valued at S$3.53 (based on DCF: WACC 6.6%; TG 3%). We recommend investors to wait for a better entry point to accumulate the counter.
Publish date: 26/09/13