• Positive on Africa
• Substantial rewards in medium to long term
• BUY with S$3.50 FV

Focusing on Africa

Wilmar International Limited (WIL) recently held its AGM (Annual General Meeting) and one of the key themes that management highlighted was Africa – the world’s second fastest growing economy over the last two decades. WIL first entered into the continent some 15 years ago via its investment in two trading companies importing edible oils into East and South Africa. Since then, WIL is now present in 13 African countries and have invested about US$800m in the cultivation of oil palm, rubber, edible oils refining and packing, specialty fats production, soap and detergent manufacturing, oilseed crushing as well as sugar plantations.

Outlook for Africa still positive

Management remains positive on the prospects there, especially for palm oil. WIL believes that Africa has great potential for agricultural development and a consumer market, given that the continent still has more than 60% of the world’s unutilized arable land, low per capita consumption and a young and rapidly growing population. As WIL has invested significant financial and human resources in Africa (undertaking long-gestation projects such as plantations, manufacturing plants and establishing branded consumer products), it believes that it can see substantial rewards (ROIs to likely exceed 20%) in the medium to long term.

Near-term business outlook remains mixed

However, the near-term business outlook remains slightly mixed. As before, WIL expects the lower palm, crude oil and sugar prices to negatively impact its plantation, palm bio-diesel and sugar milling segments, but it believes its processing and downstream businesses should benefit from lower feedstock costs. As a whole, WIL says its integrated business model should enable stable and resilient earnings in 2015. As WIL will be releasing its 1Q15 results on 7 May (analyst briefing on 8 May), we will hold off adjusting our numbers until then. Note that we had already adjusted our FY15 estimates down by 10% after its 4Q14 results. Maintain BUY with an unchanged S$3.50 fair value (based on 13x FY15F EPS).

Source: OCBC Research - 29 Apr 2015