Warrants Highlight

Wilmar - Dust Settled or Worse to Come?

Macquarie is pleased to list the following new warrants this morning:

Wilmar is the talk of the town recently as it fell to an intraday low of $3.04 last Wednesday after announcing a devastating 2Q12 results. Its net profit fell 70% year-on-year (YoY) to US$117.1mn, compared to Bloomberg consensus estimates of $316.5mn. Since then, Wilmar share price stabilised and recovered to close at $3.22 yesterday, down 5.0% from its pre-earnings announcement levels.

The reaction to the 2Q results was not as exaggerated as 3 months ago when Wilmar announced a 34% YoY drop in its 1Q12 net profit. The stock dived 15.5% in the following 5 trading sessions.

Dust settled…
Looking at the bright side, the management continued to reassure that the company's long term prospects remain intact and Wilmar is well-positioned to capture demand growth in Asia and emerging markets. However, it is noted that times could be tough in the near future, particularly due to the excess oilseeds crushing capacity in China.

Early this year, the shareholders of Wilmar authorised a share buy back program at its AGM. Under the plan, the company could repurchase up to 10% of its share capital. Till now, the management has not started its buy back program. Its commencement could be supportive to Wilmar’s share price as seen through the effects of Olam’s share repurchase program.

or worse has yet to come?
Oilseeds & Grains division was the main disappointment in 2Q12, posting a US$40mn loss. Its traditionally stronger Palm & Laurics division (CPO refining) fell short of expectation as well. The management said that crush margin was poor and was exacerbated by losses from the depreciation of RMB against USD.

Yesterday, Macquarie Equities Research (MER)* cut its medium term estimates by about a quarter. MER cut price target to S$3.00 from S$4.57 (implied 2013 target PE of 11.7x). Reasons leading to the decision include 1) limited scope for upside to earnings and, 2) a return to historical mid-teens P/E multiples looks hard to justify today.

MER stay Neutral, but expect Wilmar to underperform from a country perspective (10% upside to their FSSTI target).

Singapore Market Wrap

Markets failed to rally with increased liquidity

With better than expected data from the US signalling that the world's biggest economy might be improving, Asian stocks rose. In addition, the China's central bank stepped up reverse-repurchase operations today, injecting a total of 220bil yuan through 7-days and 14-days agreements.

However, early gains were short-lived as speculation that the European Central Bank might buy bonds to lower borrowing costs were countered by denials by ECB officials and there were signs from Germany that it opposes such moves.

The STI closed at 3065.77, up 0.1% dod while the HSI closed at 20100.09, flat for the day.

STI 3100MBeCW121031 (Q1AW) exercise level 3,100.*
STI 2950MBePW121031 (Q0ZW) exercise level 2,950.*

HSI19800MBeCW120927 (Q1DW) exercise level 19,800.*
HSI20400MBePW120927 (Q1SW) exercise level 20,400.*

Noble to target agricultural assets in the US
Shortly after announcing record sales in the second quarter, Noble is looking to target agricultural assets in the US so as to meet demands from China. CEO Yusuf Alireza said that "China is going to be a largest importer of corn over the next few years and Noble wants to be in the position to help supply that".

However, "it's hard to be the supplier and partner of choice for China in the grain space, and especially in the corn space, without having significant origination assets in the US" since US was the top corn producer according to USDA. Alireza added that the company is looking to make the investment over the medium term.

Noble closed at $1.255, down 0.8% dod.

Call warrant NobleGrpMBeCW130201 (Q5OW) exercise price $1.40.*
Put warrant NobleGrpMBePW130103 (QZ6W) exercise price $1.10.*

Launch of first 4G service for tablets
SingTel will launch the country's first 4G service for tablets on Tuesday, 28th Aug. The 4G service is three times faster than the current 3G services. With this launch, SingTel will also be launching a new subscription plan, the Prestige 75. Monthly subscription will be priced at either S$49.90 or S$64.90 per month, depending on how much customers pay upfront for the tablets.

SingTel is aiming to be the first in Singapore to bring in 4G capable tablets for their customers. SingTel CEO Consumer Singapore Yuen Kuan Moon said, "we were the first to bring 4G smartphones to Singapore, and we are thrilled to be the first to put 4G tablets into the hands of our customers.

Investors cheered the news and Singtel closed at $3.35, up 1.8% dod.

Call warrant SingTelMBeCW130301 (PB6W) exercise price $3.30.*

Overnight Market Wrap

Concessions for Greece available but...

Indices in Europe rallied, with the Euro Stoxx 50 adding 1% yesterday. A senior lawmaker with Chancellor Angela Merkel said that concessions are available for Greece as long as they show willingness to meet the main targets set out in their bailout.

While Germany will not be willing to extend further aid, they have no qualms bringing forward existing aid if "there's plausible proof that it won't create new fiscal gaps in future". Norbert Barthle, the Christian Democratic Union's budget spokesman said that small concessions like adjusting the interest and the maturity on loans could be done.

In the US, the S&P fell 0.4% dod, closing at 1414.17 yesterday while waiting for the release of the minutes for the Fed's last meeting. The minutes will be released tonight.

Overnight Markets

Indices	Last	Change
STI	3065.77	0.1%
HSI	20100.10	-0.0%
DJIA	13203.60	-0.5%
S&P 500	1413.17	-0.3%
Nasdaq	3067.26	-0.3%
China A50	7264.53	-0.0%

Corporate News

Corporate Announcements

Cosco secured a contract valued over US$20mn to build a Jack-up Barge.

Keppel's subsidiary finalised a contract to build an accommodation semi-submersible worth US$315mn

Results announcements:
Tue 28 Aug: Olam 4Q12

Ex-dividend dates:
Wed 22 Aug: Wilmar ($0.02)
Thu 30 Aug: Sakari ($0.02), UOB ($0.20)
Wed 26 Sep: SGX ($0.15)