SGX Stocks and Warrants
Wilmar - MER Sees $4.57 Target
Warrants Highlight
Wilmar - MER Sees $4.57 Target
Macquarie is pleased to list the following new warrant over Wilmar International this morning:
| Code | Name | Type | Expiry | Exercise Price |
| QF1W | Wilmar MBeCW121102 | Call | 02-Nov-12 | 4.60 |
Last Thursday, the world’s largest palm-oil processor Wilmar International posted a larger than expected drop in their first quarter net profit, mainly due to an unexpected loss in the volatile oilseeds & grains division. The result sent Wilmar’s stock price to a three-year low.
Post Thursday’s price drop, Macquarie Equities Research (MER) has gone on to cut their target price to $4.57 on the stock in its research report dated 11 May 2012. Here’s why.
Upgrade Path Required to Jump Start Performance
On the day of the released report on 11 May, Wilmar was trading at 13.8x its 2012 estimated price earnings (PE). Based on Wilmar’s closing price of $4.27 last Friday, MER’s new target had implied a 7% upside and a target PE of 14.6x.
In past periods of earnings weakness, MER has seen Wilmar test the lower end of its trading band (12.5x). If anything, this creates near term downside risk to the $4 level on MER’s revised 2012E earnings per share (EPS) of $0.31.
Therefore, MER thinks that a renewed upgrade cycle will be required for the market to revisit the Wilmar story. As there is only a tenuous link between Wilmar’s theoretical leading indicators and its results, MER thinks the market will have to wait until at least the 2Q12 earnings release for such a phase to realistically begin.
Reason for MER’s target price trim
The key driver of Wilmar’s earnings miss was its Chinse soybean crushing business. Sugar and Associates also disappointed. MER has cut their estimates in these three divisions.
MER has reflected their most current crude palm oil price forecasts in this model revision, which benefits the upstream division, and partially offsets the impact of these cuts.
MER cut their clean EPS by 8% in the near term (2012-13E) and by 5% over the forecast period (through 2016E). MER considers their longer-term steady state estimates already fairly conservative.
As a result of these cuts, MER also had to cut their terminal return on invested capital (ROIC) assumption in 2016E by 1% to 8%. This determines the reinvestment rate into perpetuity in its DCF, and is why the price target falls by a greater amount than MER’s estimate cuts.
Finally, MER cut their 12-month price target by 12% to $4.57 and retained their ‘Neutral’ rating on the stock.
MER believes that the price catalyst for Wilmar may come in mid- August, when Wilmar report their second quarter results.
Singapore Market Wrap
The Slight Rebound to Ease the Pain
The STI rose 0.4% day-on-day (dod) to 2,876.40, its strongest daily performance for more than a week. However, warrant investors did not seem to be convinced with the rebound, as they bought heavily into STI Puts P8CW. More than 8mn P8CW warrants were traded yesterday.
Call STI 3000MBeCW120629 (P8BW) exercise level 3,000.*
Put STI 2900MBePW120629 (P8CW) exercise level 2,900.*
Longer-dated Call STI 3100MBeCW130131 (PA7W) exercise level 3,100.*
Longer-dated Put STI 2800MBePW130131 (PA8W) exercise level 2,800.*
Biosensors made a sharp U-turn
Blood stent manufacturer, Biosensors, rebounded sharply yesterday, reversing all its Monday losses. Its shares rose 9.3% to close at $1.23. Biosensors said that it is planning for its first large-scale study of BioFreedom, the company's polymer-free drug-coated stent. At the same time, the BioMatrix Flex was chosen for the largest ever clinical trial involving a drug-eluting stent.
Call BiosensoMBeCW121101 (QD9W) exercise price $1.40.*
Olam fell to $2.00
Olam fell another 1.5% yesterday to $2.00. After markets, Olam reported 23% year-on-year decline in 3Q net profit to $98.7mn. The management said that the Industrial Raw Materials and Commodity Financial Services are expected to continue to pose a drag to its Q4 earnings. However, the management also said that they remain positive about Olam's long term fundamentals of the business.
Call OLAM MB eCW120903 (P6CW) exercise price $2.40.*
Overnight Market Wrap
Greek Coalition Talks Failed
Final talks for a coalition government failed yesterday so the Greeks will be heading to the polls again in mid June. Investors worried that the anti-austerity, anti-bailout parties will gain the upper hand in the next election. IMF head, Christine Lagarde, openly discussed the possibility of an orderly exit of Greece from the Euro.
Both European and US indices slipped, with the S&P500 falling 0.6% to 1,330.66. US consumer prices were flat month-on-month, while advanced retail sales fell to 0.1% from 0.7% in March.
Overnight Markets
| Indices | Last | Change |
|---|---|---|
| STI | 2876.70 |
0.4%  |
| HSI | 19894.31 |
0.8% |
| DJIA | 12632.00 |
-0.5%  |
| S&P 500 | 1330.66 |
-0.6% |
| Nasdaq | 2893.76 |
-0.3% |
Corporate News
Corporate Announcements
Olam reported a 3Q12 net profit of $98.7mn, a 22.5% drop from the previous year.
Results Announcement
Tue 29 May: Biosensors 4Q12
Ex-Dividend Date
Thu 17 May: Yangzijiang ($0.055)
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| Chart | Stock Name | Last | Change | Volume |
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