Excluding biological loss, 4Q13 results fell short of our numbers but met consensus expectations. Core net profit largely in line.

New stake in a leading sugar company in India announced. We think this acquisition comes at the right time.

Reiterate BUY and TP of SGD4.29.

Core PATMI met consensus estimates but below ours

Wilmar’s 4Q13 revenue was little changed YoY at SGD11.6b but its core net profit saw a 12.0% YoY drop to SGD352.9m. The contraction was due to a lower amount of cane crushed in 4Q13, given that most of the crushing took place in 3Q13 due to favourable conditions then.

Investment themes reinforced

Wilmar’s 4Q13 results reinforced our key investment themes, ie, better soybean crushing margin in China and a recovery in sugar business. Thanks to the continually improving soybean crushing margin, its Oilseeds & Grains division posted a 150% YoY PBT growth in 4Q13. On a full-year basis, PBT was 15x more than in FY12. We believe the recovery in this sector will persist in FY14. The sugar business also recorded growth in PBT in FY13, up 26.8% YoY, buoyed by higher volume despite the low sugar price. We expect the sugar division to be an important growth driver for Wilmar in the next few years as capacity expansion continues and sugar price increases.

Acquires stake in sugar company in India

In a separate announcement last night, Wilmar said it is investing around USD200m in Shree Renuka Sugar (SRS), a leading sugar company in India. Although SRS is currently loss-making, we think the 1x book valuation is fair and the acquisition comes at the right time as we believe sugar price is bottoming out. Reiterate BUY and TP of SGD4.29 (previously SGD4.30), pegged to 15x FY14E P/E.  

Source: Maybank Kim Eng Research - 21 Feb 2014