Wilmar: Upgrade to BUY – decent entry level
Wilmar International Limited’s (WIL) share price has taken
a bit of a hit after it reported slightly below par 1H13
results on 7 Aug (core earnings met about 40% of our
previous full-year forecast), falling 4.5% to a recent low of
S$3.0x. But as mentioned in our 12 Aug report, we would
be buyers at S$3.10 or better, as we believe that most of
the risks would have been captured in the price. Keeping
our fair value at S$3.33 (still based on 12.5x blended
FY13/FY14F EPS), we note that there is now a decent 10%
upside from here. Hence we are upgrading our call from
Hold to BUY. Note that an appreciating USD against SGD
would also have a modest boost to our fair value
News Headlines
• US stocks climbed for a third consecutive session on Thu,
with the Dow posting its longest winning run since mid of
Jul, as investors looked to the government’s monthly job
report.
• Moody’s Investors Service has downgraded the
subordinated debt ratings of 3 Singapore banks in a
region wide exercise to reflect the increasing global trend
of bail-in risks.
• The consortium comprising Nobel Design, Lian Huat
Group and 2E Capital, which bought the freehold Hotel
Windsor in the MacPherson area last year, is converting
the hotel's office-retail podium into a strata retail
development for sale.
• SingTel’s wholly owned unit, Amobee, has conditionally
agreed to pay US$15m for Gradient X, a firm with net
tangible liabilities of about US$1.1m as at end-May.
• Asia-Pacific Strategic Investments is trying again to turn
its business around after announcing plans for a reverse
takeover deal to become a mining play.
• Hiap Hoe Limited expanded its overseas portfolio with a
A$105m (S$122.2m) acquisition of a mixed use retail
and office asset in the Central Business District of
Melbourne, Australia.
• Rex International has announced their 2QFY13 result,
with a reported net loss of US$685k, as compared to net
loss of US$287k in 2QFY12.
Key Singapore Indices
Close Chg % Chg
STI 3039.5 24.0 0.8
Catalist 182.1 unch unch
Finance 783.8 1.6 0.2
Property 702.1 -2.0 -0.3
Electronics 687.6 0.8 0.1
Vol(m) 3876.1 253.4 7.0
Val(S$m) 1176.5 -157.3 -11.8
World Indices
Close Chg % Chg
Dow Jones 14937.5 6.6 0.0
Nasdaq 3658.8 9.7 0.3
S&P500 1655.1 2.0 0.1
FTSE 6532.4 57.7 0.9
KLCI 1721.0 4.2 0.2
Hang Seng 22598.0 271.8 1.2
Nikkei 14064.8 11.0 0.1
SET 1313.5 10.3 0.8
KOSPI 1951.7 18.6 1.0
TWSE 8169.1 85.7 1.1
Market Statistics (SG)
STI 52-week range 2,932 3,465
No. of gainers 337
No. of losers 195
No. of unchanged 153
Economic Statistics
S$/US$ 1.3 0.0
Yen/US$ 100.1 0.0
3-mth S$ SIBOR 0.4 0.0
3-mth US$ SIBOR 0.3 0.0
Crude futures (US$) 108.5 0.1
Research Team
(65) 6531 9800
e-mail: info@ocbc-research.com
OCBC Investment Research
Market Pulse
6 Sept 2013
2
Wilmar: Upgrade to BUY – decent entry
level
● Enter at S$3.10 or better
● Upgrade to BUY
● Expect better 2H showing
Fallen to a decent entry level
Wilmar International Limited’s (WIL) share
price has taken a bit of a hit after it reported
slightly below par 1H13 results on 7 Aug
(core earnings met about 40% of our
previous full-year forecast), falling 4.5% to a
recent low of S$3.02. But as mentioned in
our 12 Aug report, we would be buyers at
S$3.10 or better, as we believe that most of
the risks would have been captured in the
price.
Upgrading to BUY
Keeping our fair value at S$3.33 (still based
on 12.5x blended FY13/FY14F EPS), we note
that there is now a decent 10% upside from
here. Hence we are upgrading our call from
Hold to BUY. Note that an appreciating USD
against SGD would also have a modest boost
to our fair value.
Should also expect a better 2H
performance
In addition, WIL tends to perform better in
the second half. One reason is the
seasonality of its sugar business in Australia.
That outfit will typically reverse from a lossmaking
position to a highly profitable one.
And with the sugar prices (see Exhibit 2)
already on the rebound, we believe that
2H13 would be no exception (although there
may still be lingering concerns1 over a
mystery cane disease – Yellow Canopy
Syndrome – that causes canes to turn
yellow).
Limited impact from slowing China
growth
Meanwhile, China – WIL’s largest market –
appears to be opting for slower growth this
year to allow the government to solve
fundamental problems hindering long-run
development, according to President Xi
Jinping1. However, we note that market still
expects China to expand by 7.5% this year,
which should not pose any issues for WIL’s
consumer pack business. Management had
previously said that retail packs are fairly
resilient and may even benefit from more
people choosing to cook at home rather than
dining out. (Carey Wong)
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