Above expectations. 1Q13 results were above expectations, with recurring net profit up 53% yoy and making up 23% of full-year consensus (2H is seasonally stronger due to sugar contributions). We remain convinced that earnings expectation are still too low, and current stock price level represents an opportunity for accumulation.

Recurring net profit up 53% yoy. Growth was driven by increasing overall volume (up 13% yoy) and better margins. In particular, oilseeds & grains reversed its losses from last year, with a swing factor of USD99.7m. The sugar business continues to show good potential, with high volume growth and narrowing seasonal losses. The 53% growth came in spite of lower CPO prices being a drag factor.

Decline in plantation earnings will be mitigated. While Wilmar is one of the largest palm plantation owners in the world, upstream earnings only accounted for 17% of earnings in 1Q13. Even with a decline due to lacklustre CPO prices, we expect the other businesses to more than pick up the slack. We see this environment as positive for its palm & laurics division, which will enjoy healthy margins with lower feedstock cost and high stockpile level.

Other businesses are building up well. We are positive on the buildout of other businesses. For example, sugar which is relatively new will be an important contributor this year. Merchandising volume continues to grow exponentially (up 144% yoy) and the increasing scale may bring in operating leverage on the bottom-line. The recent acquisition of a 26.5% stake in Cosumar will give it presence in North Africa for sugar, also completing its presence in Africa.

Look forward to earnings recovery. With a dominant agribusiness, Wilmar remains very relevant to longer-term growth in Asia. Valuations are at cyclical lows and represent opportunity for accumulation. We keep our forecasts largely unchanged, and expect earnings to rebound from 2012 levels, though we are wary of quarterly fluctuations especially from soybean crushing, where profit continues to be generated opportunistically. We reiterate BUY, with a TP of SGD4.60, pegged to 16x FY13F, its five-year historical mean.

Source: Maybank Kim Eng Research - 9 May 2013