BUY S$3.38 STI: 3,177.25
(Upgraded from HOLD)
Price Target: 12 months S$3.83 (Prev S$3.53)
A strong comeback
•Wilmar’s 3Q13 core earnings of US$391m (+1% y-o-y; +60% q-o-q) were above our expectations
•Earnings were buoyed by contributions from Sugar and Oilseeds & Grains M&P
•FY13F-15F earnings raised by 12%/7%/5%; as we impute higher Sugar contribution, better M&P and Consumer margins
•Rating upgraded to BUY for 15% total return potential. No interim DPS was declared
3Q13 earnings exceeded expectations. Wilmar’s 3Q13 core earnings came in at US$391m (+1% y-o-y; +50% q-o-q) – or 26% above our mid-range forecast of US$303-317m. Including a US$24m gain from the divestment of Fortune Gas Investment Holdings and other non-operating items, Wilmar posted a net profit of US$416m (+3% y-o-y; +90% q-o-q), representing 36% of our initial full-year forecast.
Improving margins, volumes. Wilmar booked sequentially higher contributions across the board. Seasonal jump in sugar top line, recovery in Oilseeds & Grains M&P margins and higher Consumer pretax boosted the group’s 3Q13 earnings. This was however partly offset by a drop in Associate income and flat Plantations contribution.
FY13F/14F/15F earnings raised by 12%/7%/5%, as we adjusted sugarcane yields and ASP higher; and lifted Oilseeds & Grains M&P pretax margins to 1.2-1.3% from 0.8%. We also increased Consumer pretax margins to 2.3% from 2.0%, as we believe the group has achieved better economies of scale through expanded refining capacity, as well as higher rice & flour milling contributions. Based on these revisions, we raised the counter’s TP to S$3.83 (based on DCF, WACC 6.8%, Rf 3.0%, Rm 10.7%, Beta: 1.0x, TG 3.0%).
BUY for 15% total return potential. The counter currently offers c.13% upside to our revised TP and c.2% dividend yield. We recommend investors to accumulate, given the recent correction. Based on our revised forecasts, we expect 6% earnings CAGR between FY13F and FY16F.
Publish date: 11/11/13