OUTPERFORM Maintained
S$5.11 Target: S$6.25
Mkt.Cap: S$33,091m/US$27,112m
Palm Oil
• Above; maintain OUTPERFORM. 1H11 core net profit of US$811.7m accounts for 53% of our FY11 forecast and 49% of consensus. We consider the results to be above our expectation (on stronger-than-expected plantation and refining earnings due mainly to better selling prices) as we are expecting a stronger 2H11 from its sugar and consumer-products segments. As expected, the group announced an interim dividend of 3 Scts. We expect Wilmar to weather any potential economic downturn better than its peers due to its strong management and business model. We are keeping our EPS forecasts and target price of S$6.25 (16x P/E) for now, but may raise them after the results briefing. Potential catalysts are stronger results and possible M&As.
• Highlights. 2Q11 core net profit (excluding fair-value losses on embedded derivatives of convertible bonds and the reversal of derivatives’ marked-to-market losses) grew 4.6% yoy to US$403.9m, led by improved performances from its plantations and palm-oil mills as well as better margins achieved for its palm and laurics segments. However, consumer products’ margins were lower due to priceincrease restrictions in China while the sugar segment lost money as the milling business remained in the maintenance period and the crush season had not commenced. Earnings from oilseeds and grains were weaker due to poor crushing margins in China as a result of the country’s high imports of beans. Part of the better performance in 2Q11 stemmed from forex gains from a depreciating US$ against regional currencies, which led the group to book higher “other operating income” of US$224.8m against US$55m in the previous year.
• Wilmar remains positive on its prospects, despite a challenging operating environment in China and uncertainties in the global economy. It expects to benefit from the strong growth of Asian economies, the strength of its business and its investments in new and existing businesses.
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