• FY13 core profit came in at US$1.3bn (+12% yoy) – in-line with expectation.
• Better-than-expected Oilseeds & grains margin.
• Final DPS of S$0.055 declared.
• Maintain "Accumulate” and TP of S$3.88.

What happened?

Wilmar’s  FY13 core net  profit  (excluding non-operating items and FV changes in biological assets)  increased by  12% yoy to US$1,303mn, which is in-line with our estimates of US$1,306mn.  The group surprised with a proposed final dividend of S$0.055/share  (vs S$0.030/share for FY12). Coupled with the interim dividend of S$0.025/share,  full-year  DPS  amounts  to  S$0.080  in  2013,  which  represents  a dividend payout of more than 30%.

How we view this

Profitability  improvement  in  Oilseeds  &  grains,  Consumer  products,  and  Palm  & laurics  was  partially  offset  by  weaker  performance  in  the  Plantations  divisi on. Oilseeds & grains division was the star performer in 4Q as PBT improved by 150% yoy (+115% qoq), with margins rising by 128% yoy (+108% qoq) to US$20/MT and sales volume increasing by 10% yoy (+4% qoq), on improving demand as well as tight local supply conditions resulting from delayed soybean shipments. This is the division’s  6th consecutive  quarter  of  profits,  and  we  expect  margins  to  hover around US$10-15/MT in FY14, as China gradually absorbs its overcapacity.

In addition, Wilmar has proposed to acquire strategic stake in Bombay listed Shree Renuka Sugars for ~US$200mn.  We view this positively, as the transaction allows Wilmar  to  establish  footprint  in  the  world’s  biggest  sugar-producing  markets  – India and Brazil.  Albeit the near-term earnings impact is not material, we believe the  acquisition  provides  long-term  synergy  with  Wilmar’s  sugar  business  in Australia, New Zealand, Indonesia and Morocco.

Investment Action

Wilmar’s  long-term  fundamentals  remain  sound;  we  continue  to  see  strength  in its  Oilseeds  &  grains  and  Consumer  products  divisions,  while  Palm  &  laurics division remains robust.  We keep our earnings estimates intact.  Our target price remains at S$3.88, still based on a blended PE (14.0x FY14E) and DCF valuations. Maintain Accumulate.

Source: Phillip Securities Research - 24 Feb 2014