Fair value S$3.55
add: 12m dividend forecast S$0.06
versus: Current price S$3.45
More positive on 4Q13 outlook
Wilmar International Limited’s (WIL) 9M13 core earnings of US$950m met 76% of our FY13 forecast, even though revenue of US$32,463m only came up to 66% of our full-year estimate. Reflecting the latest results, we pare our FY13 and FY14 revenue forecasts by 10% and 13% respectively, while keeping our earnings estimates largely unchanged. Our fair value also improves from S$3.33 to S$3.55, as we roll forward our 12.5x valuation to FY14F EPS. But we believe that the recent run-up in price has captured most of the positives. As such, we maintain our HOLD rating and would be buyers closer to S$3.30.
No surprises in 2Q14
SIA Engineering Company's (SIAEC) 2Q14 results were in line with ours and the street's expectations. 1H14 basic EPS of 12.60 S cents formed 50% of ours and 49% of the street's prior FY14 estimates. 2Q14 revenue rose 3.3% YoY to S$293.9m, chiefly due to an increase in airframe and component overhaul work. Operating profit contracted 9.8% YoY to S$28.5m due to higher staff and subcontract services costs. Operating profit margin at 9.7% was similar to the 9.6% clocked in 1Q14. Share of profits from associated and JV companies expanded 25.0% YoY to S$48.5m, representing a contribution of 60.0% of the group's pre-tax profits. 2Q14 PATMI thus rose 5.8% YoY to S$71.0m. However, we note that 1H14 PATMI and basic EPS are only up 2.0% and 1.0% at S$140.0m and 12.60 S cents respectively. The company has declared an interim dividend of 7 S cents per share, the same as last year.
37% of SIAEC’s 1H14 revenue is non-SIA
For 1H14, 63% of SIAEC’s revenue came from Repair & Overhaul, with the remainder from Line Maintenance. This is comparable with 1H13, when Repair & Overhaul accounted for 65% of revenue. Operating profit margin for Repair & Overhaul fell from 5.5% in 1H13 to 4.1%, while the margin for Line Maintenance declined from 21.8% last year to 19.0% in 1H14. For 1H14, the percentage of non-SIA work for SIAEC, its subsidiary companies and its JVs and associated companies are as follows: 37%, 64% and 69%. On a combined revenue basis, non-SIA work is 63%.
Business to remain stable
Management expects that the group's business will remain stable despite the challenging operating environment arising from uncertainties in the world economy. SIAEC will continue focusing on improving productivity and minimizing costs.
Making slight adjustments to our model, we raise our FV from S$5.00 to S$5.14 (based on EPS forecast of 25.7 S cents for FY14 and the same 20.0x peg). Maintain
Publish date: 08/11/13