Excerpts from DBS Research report

Analyst: William Simadiputra

What's new
• Raised FY22F earnings by 16% to US$1.89bn

Wilmar

Share price: 
S$4.69

Target: 
S$6.67

• Expect Wilmar’s upstream-mid stream division to stay profitable

• Wilmar deserves to trade at a premium to peers’ PE

• Maintain BUY with TP of S$6.67


Wilmar Nodeforest1.21

Strong margin outlook

Investment Thesis
Growth drivers in place. We expect Wilmar’s earnings will continue to grow in 2022, as it capitalises on high raw material costs and better vegetable oils refining margin via its extensive refining and manufacturing facilities.

Another leg of earnings growth will be improving soybean crushing margins and volumes in China.

Wilmar deserves to trade at a premium to plantation peers’ PE multiples. We believe Wilmar deserves to trade at a higher PE multiple vs. its plantation peers, as other than exposure to raw material price volatility, earnings downside risk is minimal.

Wilmar’s packaged consumer products’ margins and earnings can help to buffer its earnings performance when commodity prices reverse.

Undervalued amid strong earnings performance and 
Wilmar’s transition to the consumer space. With its well-established manufacturing and logistics facilities, Wilmar could penetrate further into consumer segments with stronger pricing power such as Condiment and Noodles.

Valuation:
We use sum-of-the-parts (SOTP) valuation methodology to arrive at a target price (TP) of S$6.67, which implies 16.5x FY21F PE.

Wilmar should trade at a higher PE multiple as it enlarges its footprint in the consumer branded products segment, which has better margins.


Where we differ:
Wilmar is undervalued amid its transition into a consumer company. We believe Wilmar ex. China operations is undervalued at the current share price, given that these operations could offset YKA’s weak margins amid rising raw material prices.

Key Risks to Our View:
Worse-than-expected margin performance. If Wilmar fails to secure favourable raw materials at a good price, it may not be able to maintain its positive earnings performance.


Share Prices

Counter NameLastChange
AEM Holdings3.700-0.100
Avi-Tech Electronics0.280-
Best World1.760-0.030
Broadway Ind0.120-
China Sunsine0.395-0.010
DISA0.003-
Food Empire0.640-
Fortress Minerals0.375-
Geo Energy Res0.3550.005
Golden Energy0.7950.005
GSS Energy0.048-0.001
InnoTek0.460-0.010
ISDN Holdings0.400-0.005
ISOTeam0.090-
IX Biopharma0.125-0.002
Jiutian Chemical0.080-
KSH Holdings0.350-
Leader Env0.056-
Medtecs Intl0.136-0.002
Meta Health0.025-
Nordic Group0.465-0.010
Oxley Holdings0.151-
REX International0.225-0.010
Riverstone0.6250.010
Sinostar PEC0.185-0.010
Southern Alliance Mining0.410-0.090
Straco Corp.0.395-
Sunpower Group0.2750.005
The Trendlines0.092-0.001
Totm Technologies0.102-
UG Healthcare0.190-0.004
Uni-Asia Group0.810-
Wilmar Intl4.050-0.040
Yangzijiang Shipbldg1.380-0.020

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 714 guests and no members online