Excerpts from Maybank KE report

Analyst: Thilan Wickramasinghe

Potential surprises on the way? We see four areas where WIL can potentially surprise in 4Q20:

(i) record soybean crush margins,
(ii) rising palm oil prices,
(iii) normalising postCOVID activities in China and
(iv) margin accretive Indonesian export taxes.


Share price: 


Yet the Group is trading at a 75% discount to its own Chinese listed subsidiary.

We believe, over the longer term, this may trigger further actions to unlock value such as more asset carve outs or even privatisation.

While WIL has re-rated 21% in the past 1-month, we believe significant upside exists as they execute.

Raise TP to SGD6.80. BUY.


Better than expected operating environment

4Q20 Chinese soybean crushing margins have increased 3x QoQ to reach the highest level since records began in 2015.

Chinese hog inventories have increased 42% YoY in 2020, as it rebuilds stocks following African Swine Flu (ASF).

Nevertheless, inventories are still ~20% below pre-ASF levels.

As China’s largest soybean crusher, this should result in significant upside surprise to WIL margins in 4Q20, we believe.

In 3Q20, Management claimed hotel/restaurant demand is normalising as activities increased with COVID-19 containment.

We expect further acceleration here.

While rising food prices are a concern (UN FAO index up 18% since May 2020), but WIL claims they have been passing on the higher costs so far.

The 30% 4Q20 rise in palm oil prices may drive upside surprise for WIL’s upstream business, while the recent changes to Indonesian palm oil export taxes should positively impact its refined palm oil exports, we believe.

Wilmar Nodeforest1.21Wilmar is one of the world’s largest oil palm plantation owners. It says its plantations and mills operate in an environmentally and socially responsible manner. Its policy is: No Deforestation, No Peat, No Exploitation.
Photos: Company

Same asset. Two hugely different values

WIL’s 90% Chinese subsidiary YKA (300999 CH, CNY129.80, NR) has risen 2.2x since its IPO in Oct 20.

This means the parent is trading at a 75% discount on SGX with its other regional businesses having no implied value.

While there are advantages by the fact that the HoldCo is listed in Singapore (such as funding access), the large valuation differential may catalyse further strategies to unlock value.

Over the longer term, this may include further asset hive-offs or privatisation, we believe.


Upgrade TP to SGD6.80. Maintain BUY

Thilan WickramasingheThilan Wickramasinghe, analystWIL is set to release 4Q20 end-Feb. We leave our EPS estimates unchanged.

However, we update our blended DCF (WACC 5.3%, 1% terminal growth) and peer PE (target PE of 44x), to the latest price action of peers.

In an abundance of caution, we have reduced the DCF:PE weighting on the TP from 70:30 to 80:20.

YKA trades at 87x 2021E PE vs. 15x for WIL.

Full report here 

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