Within expectations. We believe FY12 results were broadly within expectations, with recurring net profit coming in at USD1.17b (+5% above consensus estimates). We believe signs of earnings recovery are already evident from 4th quarter numbers and continue to see a positive FY13 for Wilmar as it rides a China recovery.

FY12 down on CPO and soybean crushing. Volume grew 8% during the year, though revenue was mostly level on weaker commodity prices. Performances across its divisions were a mixed bag, though Group recurring earnings were down 23%. Plantations division showed lower profit on declining CPO prices, while oilseeds & grains suffered a big reversal from FY11. Other divisions showed healthy earnings.

Signs of recovery in 4th quarter results. PBT excluding non-op items was up 35% yoy during the quarter. Oilseeds & Grains division showed another quarter of profit, and we expect the recovering Chinese soybean import data to underpin a positive year in 2013. This is seasonally an important quarter for sugar, and the division showed some of its earnings potential. In particular, sales volume for merchandising almost doubled. We expect the increasing scale may be a key profit driver in 2013, given Wilmar’s strong network franchise.

Palm and Laurics will be a standout in 2013. We believe this business which now makes up almost 50% of Group PBT will be stronger than expected in 2013. Historically low CPO prices and high stockpile will improve refining margins and increase Wilmar’s bargaining power on account of its unrivalled distribution network in China. PBT margins continued to rise into the 4th quarter as expected. While this may moderate in 2H as new industry capacity come on stream, we still expect Wilmar to benefit from its scale this year.

Look forward to earnings recovery from 1QFY13 onwards. Adjusted net-debt/ equity improved slightly to 0.36x. Going forward we expect the lower capex guidance will help bring this down further. Management expects future expansion focus will be on Africa and Myanmar, where there is good long-term potential. We reiterate BUY, with a TP of SGD4.60, pegged to 16x FY13F.

Source: Maybank Kim Eng Research - 25 Feb 2013