In line with plans to expand its sugar business, Wilmar announced yesterday evening of a new joint venture, “Raizen and Wilmar Sugar Pte. Ltd.” or “RAW”, following earlier news articles on this since Dec 15. This is a 50:50 JV with Raizen Energia S.A., Brazil’s largest producer of very high polarization (VHP) sugar.

With Raizen’s output of ~3m metric tonnes of VHP sugar, and Wilmar’s existing origination in Brazil, RAW will export a total volume of ~4.5m metric tons annually as it leverages on Wilmar’s international network of customers. This would also make RAW become one of Brazil’s largest sugar exporters.

All relevant regulatory approvals for the JV have been obtained. In particular, VHP Brazilian sugar has high sucrose content (99.4% or more) and its sugar crystals are easier to refine into white sugar, making it one of the most sought-after raw sugar export globally. Post 2Q16 results, we had a HOLD rating and fair value estimate of S$3.00 on the stock.

Source: OCBC Research - 5 Oct 2016