2Q13 within expectations, will likely beat consensus for full-year. 2Q13 results were within expectations, with recurring net profit up 43% yoy against a weak corresponding period last year. 1H13 now makes up 42% of full-year consensus, and with seasonal sugar earnings kicking in for 2H13; we believe consensus earnings are too low. We see evidence that earnings are rebounding off a cyclical low and the current stock price level represents an opportunity for accumulation.

Earnings rebounding off a cyclical low. 2Q13 recurring net profit came in at USD245m, up 42% yoy. This was despite a 5% decline in revenue due to lower commodity prices. Overall, all business segments showed yoy PBT growth, with the exception of plantations & palm oil mills, which continues to be dragged by low CPO prices. This is in-line with our investment thesis that Wilmar will benefit overall from the lower commodity price environment, since upstream CPO only accounts for around 16% of Group PBT.

Positive outlook for the rest of the year. For soybean crushing, which managed to turn in another quarter of profit, management expects to remain in the black for the rest of the year, citing good volume expected. For consumer segment (mostly pack oil), volume and profit jumped 22% and 20% respectively yoy, even as Wilmar cut prices to reflect lower cost inputs. Management expects volume to benefit from the ongoing austerity drive as more meals are consumed at home.

Next leg of growth will come from these. In our view, Wilmar is building up leadership positions in products outside its traditional portfolio where it is already a dominant player. These will provide the next leg of growth. For example, rice and flour volume grew 60% and 29% respectively, while scale in sugar is also building up quickly.

Better times to come. We keep our estimates mostly unchanged, with our TP of SGD4.60 remaining pegged to 16x FY13F, its five-year historical mean. As a signal that management is also more upbeat, Wilmar announced an interim dividend of SGD2.5 cents, up from SGD2 cents last year. Maintain BUY.

Source: Maybank Kim Eng Research - 12 Aug 2013