Warrants Highlight

Wilmar - to bottom out with CPO price?

Sime Darby, the largest producer of crude palm oil (CPO) forecasted a rally in the world’s most-used cooking oil. The company vice president, Franki Anthony Dass, said that “reserve will diminish as exports accelerate”. According to Bloomberg, “CPO futures will rally 8.6% in Kuala Lumpur by the end of the quarter, based on the median of 13 analyst and trader estimates”.

Wilmar is involved in oil palm cultivation, edible oils refining, oilseeds crushing, consumer pack edible oils processing and merchandising, specialty fats, oleochemicals and biodiesel manufacturing, and grains processing and merchandising.

Macquarie’s Wilmar warrants 

CPO prices: -42.9% in 6 months
CPO prices had hit a 3-year low recently as the global slump took a toll on demand, pushing inventories in Malaysia to an all time high. Market participants were concerned about the oversupply and since April, CPO futures have been on a downtrend, falling 42.9% from 9 April to 2 Oct. Looking more closely at the prices, CPO futures fell 29.7% in a month, from 3 Sept to 2 Oct. This decline has been one of the steepest since 2008.

Wilmar: -36.3% in less than 6 months
Like CPO prices, Wilmar has been on a downtrend for close to 6 months. Wilmar’s decline started earlier this year on 3 May. Compared to the close of 3 May, Wilmar has underperformed the STI as it had fallen 36.3% although the benchmark index STI rose 1.5% for the same period.

CPO prices rebound
After 2 Oct, CPO prices rebounded and on 12 Oct, Malaysia, the next biggest producer after Indonesia announced a plan to cut the tax on crude exports and abolish a duty-free shipment quota to help liquidate the inventories. Dass said that this measure will “give companies the opportunity to move the surplus out of the country. That should reduce the stock and help the price move up”.

On the day Malaysia made the announcement, Wilmar’s performance far exceeded the STI as it rose 3.6% in a single day while the STI added 0.3% in contrast.

Recent Wilmar’s acquisitions
In the past month, Wilmar announced a 50:50 joint venture with Kellogg for the manufacture, sale and distribution of cereal, wholesome snacks and savoury snacks in China. While Wilmar will contribute to the distribution channels in China, Kellogg will provide globally recognized brands and products. Together, the joint venture will enable maximization of marketing and manufacturing synergies.

More recently, Wilmar received approval for a partnership in global fertilizer, European vegetable oil and global ocean freight with Archer Daniels Midland Company (ADM). The collaboration between ADM and Wilmar is not entirely new as they had jointly built a network of soybean processing operations in China from the mid-1990s. Both companies have a positive outlook for the partnership.

Wilmar is due to report third quarter earnings on 9 Nov.

Singapore Market Wrap

Mixed economic data, indecisive STI

Positive China preliminary purchasing managers' index which rose to 49.1 from 47.9 was offset by an unexpected fall of the German Ifo business confidence. The October German Ifo business confidence fell to its lowest in more than two and a half years. These news led to the STI swinging between profits and losses during the trading session, before eventually closing at 3,044.73, a minor 0.2% drop day-on-day.

Call STI 3100MBeCW130131 (PA7W) exercise level 3,100.*
Put STI 2800MBePW130131 (PA8W) exercise level 2,800.*

China Cosco CEO expecting industry to expand when Economy improves
Bloomberg reported that China Cosco Chairman and CEO Wei Jiafu commented on bullish news for the shipping industry in an interview at the Tsinghua Management Global Forum in Beijing. Not only has China Premier Wen JiaBao mentioned that the Chinese economy has seen a turning point in the third quarter, the Chinese government has also announced tax and financial support for local shipping lines in October. Cosco closed down 0.6% at $0.895 yesterday.

Call CoscoCorMBeCW130204 (Q4RW) exercise price $1.10.*

Ezra reported losses
Ezra has reported a loss of US$12.6 million for it's 2012 financial year. The losses are due mainly to demobilisation cost as well as it's first floating, production, storage and offloading vessel. It is expecting better overall results in 2013's financial result. Ezra has requested for trading halt since 1230pm on Wednesday's trading session. Prior to that, it rose 0.9% to $1.16.

Call Ezra MBeCW130603 (Q8EW) exercise price $1.172.*

Overnight Market Wrap

Fed dampens initial optimism

The S&P gapped up at the open but trended lower in its trading session, finally falling 0.3% yesterday. The index closed at 1,408.75.

The initial gains game after a report signalled that the housing situation in the US is improving. Purchases of new homes were at a 2-year high, rising 5.7% in the month of Sept and beating the Bloomberg survey which was calling for an increase of 3.2%. However, the Fed later said in the statement that "the economy is still growing modestly and unemployment remains elevated as it maintains $40billion in monthly purchases of mortgage-backed securities".

Hong Kong sold their currency for the second time this week to curb the appreciation of HKD against the USD. The currency pairing hit 7.7504 yesterday, near the upper bound of its allowed trading range.

Overnight Markets

Indices	Last	Change
STI	3044.73	-0.2%
HSI	21763.80	0.3%
DJIA	13077.30	-0.2%
S&P 500	1408.75	-0.3%
Nasdaq	2981.70	-0.3%
China A50	7326.70	-0.1%

Corporate News

Corporate Announcements

Ezra has requested for trading halt.

Earnings release dates:
Thu 25 Oct: NOL (3Q12)
Thu 25 Oct: CapitaCommercial Trust (3Q12)
Thu 25 Oct: CapitaMalls Asia (3Q12)
Thu 25 Oct: Suntec REIT (3Q12)
Tues 30 Oct: Capitaland (3Q12)
Wed 31 Oct: IndoFood Argi (3Q12)
Thurs 1 Nov: DBS (3Q12)
Fri 2 Nov: SIA (2Q12)
Fri 2 Nov: Starhub (3Q12)
Fri 2 Nov: Cosco (3Q12)
Mon 5 Nov: SembCorp Marine (3Q12)
Tues 6 Nov: Ezion (3Q12)
Tues 6 Nov: SATS (2Q13)
Wed 7 Nov: UOB (3Q12)
Wed 7 Nov: Biosensors (2Q13)
Thurs 8 Nov: Noble (3Q12)
Fri 9 Nov: SembCorp Industries (3Q12)
Fri 9 Nov: OCBC (3Q12)
Fri 9 Nov: Wilmar (3Q12)
Wed 14 Nov: GLP (2Q13)
Wed 14 Nov: City Dev (3Q12)
Wed 14 Nov: STX OSV (3Q12)

Ex-dividend dates:
Wed 24 Oct: SGX ($0.04)
Tue 6 Nov: Olam ($0.05)
Fri 7 Dec: SPH ($0.17)