Thursday, November 14, 2013

Wilmar : Prospects appear better (CS)

Wilmar International
Maintain NEUTRAL
Price (07 Nov 13 , S$) 3.45
TP (prev. TP S$) 3.73 (3.73)
Prospects appear better

● We attended Wilmar's 3Q FY13 result briefing 8 Nov afternoon, and came away feeling more comfortable with our forecasts, and its outlook We estimate that Wilmar's FY14 P/E of 13.0x is close to the Singapore agriculture sector average of 13.6x.

● 4Q plantation profits should be up YoY and QoQ, as Wilmar expects 4Q FFB output to rise QoQ while palm oil prices have already improved.


● Wilmar’s palm merchandising division should see volumes and margins remain robust going forward, one of the kickers being Indonesia's biodiesel programme. We can tell that Wilmar is confident, as it is expanding its biodiesel capacity by 20% in 2014 to support Indonesia's biodiesel programme.

● The oilseed unit has been profitable for five consecutive quarters. The worst could be over for the oilseed business in China.

Wilmar's prospects appear brighter
We attended Wilmar's 3Q FY13 result briefing this afternoon, and came away feeling more comfortable with our forecasts and its outlook. Here are the key highlights of the briefing.

Plantations – better prospects
The plantation sector was the only division that showed a fall in FFB output. However, Wilmar expects 4QFY13 FFB output to increase QoQ and YoY, as November appears to be the peak production month (rather than October). In addition, palm oil spot prices have risen 10% to RM2,528 per tonne vs RM2,300 a month ago. This suggests that 4Q plantation profits should be up YoY and QoQ.

Palm refining – margins are holding up well
Despite an overcapacity in refineries in Indonesia, Wilmar's margins for the palm merchandising division held up, due to contribution from high value-added downstream products which command better margins, such as oleochemicals and biodiesel.

Wilmar expects volumes and margins to remain robust going forward, one of the kickers being Indonesia's mandatory biodiesel programme.
We can tell that Wilmar is confident, as it is expanding its biodiesel capacity by 20% in 2014 to support Indonesia's biodiesel programme.

How does Indonesia's biodiesel targets benefit Wilmar?
Being the largest producer of palm-biodiesel in Indonesia with a capacity of 2.6mn tonnes, Wilmar is in a good position to take advantage of Indonesia's biodiesel targets (B10 for transport diesel, B20 for IPPs). We understand that Indonesia targets to utilise 3 mn tonnes of biodiesel in 2014, which is a four-fold increase from its 2012 usage of 0.7 mn tonnes. Biodiesel plants are to put in their tenders by Monday evening (11 Nov) to supply to Indonesia's biodiesel needs for 2014 and 2015. If executed flawlessly, the biodiesel mandate will reduce palm oil inventories significantly, pushing up palm oil prices.

There are two main concerns: (1) Can Indonesia execute? (2) Is this biodiesel demand sustainable? When palm-biodiesel becomes too expensive relative to crude oil prices, will the government then give up on this biodiesel targets?

Oilseed merchandising – the worst could be over
The oilseed division has been profitable for five consecutive quarters, and a rise in volumes helped profitability. Wilmar believes that the worst could be over for the oilseed business in China, as finance speculators have backed off, leading to less price under-cutting.

Consumer products - Volume growth surprised us on the upside, boosted by strong volume growth in the rice and flour business units.

Sugar – 4Q profits will likely fall QoQ and YoY as Wilmar had already crushed 80% of the 2013 season in 9M FY13 vs 60% of the 2012 season at this time last year.



Source/Extract/Excerpts/来源/转贴/摘录: CS-Research,
Publish date: 11/11/13

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