Wilmar International Ltd (WIL SP): A delayed Christmas rally
- BUY Entry – 4.08 Target – 4.38 Stop Loss – 3.98
- Wilmar is Asia’s leading agribusiness group that encompasses the entire value chain of the agricultural commodity business, from cultivation and milling of palm oil and sugarcane, to processing, branding and distribution of a wide range of edible food products in consumer, medium and bulk packaging, animal feeds and industrial agri-products such as oleochemicals and biodiesel.
- Resilient palm oil prices. Seasonally, December has been a strong month for crude oil prices.
Malaysian palm oil futures bounced back above MYR 5,1000 per tonne last week over concerns about lower production after flooding impacted plantations in Malaysia. Palm oil production shrank around 13% MoM in the first 20 days of December, according to estimates by the Malaysian Palm Oil Association. - HIgher soybean prices are also boosting palm oil prices. Palm oil prices are also receiving a boost from Chicago soybean futures which surged higher to their highest since August as dry weather threatened crops in Brazil and Argentina.
- Aggressive share buy-backs. The company bought back S$14mn worth of shares in December, bringing year-to-date share buyback to S$131mn.
Positive consensus estimates. Wilmar currently has 13 BUY recommendations and an average 12M TP of S$5.93, implying a 45% upside potential from the last closing price.