Previous day closing price: $5.30
Recommendation – HOLD (maintained)
Target price – $5.31 (maintained)
Wilmar’s Australian sugar subsidiary, Sucrogen, has been unable to secure the necessary level of support from Proserpine’s members to enable it to purchase its assets. Wilmar needed 75% of PCSMA members who voted needed to vote in favour of Sucrogen’s offer. Wilmar came close, with 70% of the vote secured. In June, Sucrogen entered into an agreement to buy the business assets for A$115m. The vote failed despite Proserpine’s board recommendation and regulator approval secured. Sucrogen alluded that there were other interested parties that may have disrupted the transaction.
The purchase of Proserpine would have increased Sucrogen’s milling capacity by about 2m tonnes to a total of 17m tonnes, and increase raw sugar production by about 10 per cent, to 2.2m tonnes. While this is a setback, we do not expect the deal to have a significant impact on Wilmar’s large earnings base. Overall, the positive aspect is evident in the high level of competition to secure such assets, and for soft commodities and agri-businesses in general. This bodes well for Wilmar’s prospects. After a volatile ride, Wilmar’s share price has recovered to our target price of $5.31. We maintain our Hold recommendation.
No comments:
Post a Comment