• Strong 4Q16
• Growth opportunities remain
• Keeping our view

Ended the year on a strong note

Wilmar International Limited (WIL) saw a strong 4Q16 with a 27% and 70% increase YoY for revenue and net profit to US$11.9b and US$561m, respectively, driven by better performance across all segments, contribution from associates as well as recognition of deferred tax assets of US$142.1m. FY16 revenue was up 6.8% to US$41.4b on stronger sales volume, which was largely within expectations.

Net profit was down 5% to US$972.2m while core net profit was also lower by 14% to US$976.6m, mainly due to the S$343.8m loss in Oilseeds & Grains segment in 2Q16. Net profit came in above Bloomberg’s consensus expectations (~US$813m), but was within expectations if the DTA recognition is excluded.

CPO price expected to ease while production set to come back

Tropical Oils segment benefited from higher CPO prices during the quarter. As such, 4Q16 pre-tax profit rose 94% to US$184.3m and FY16 was up 40% to US$689.2m. Looking ahead, OCBC Treasury Research expects CPO price to be supported above MYR2,700/MT for 1Q17 due to seasonally lower production, while they see an eventual decline in CPO price to MYR2,650/MT by year end as they anticipate ample supplies and weak demand. Meanwhile, production is expected to come back. In addition, the downstream business should remain supportive to give decent overall margins.

Steadier outlook ahead

Sugar segment’s FY16 pre-tax profit rose 49% to US$125.3m on the back of a season extension for milling activities, but also recorded a US$33.5m impairment charge as management took a conservative view in consideration of the more competitive environment for sugar refining in Australia.

Oilseeds & Grains segment has been seeing stable crushing margins for soybeans, and its Consumer Products offers long term growth potential. All considered, we have adjusted our estimates and raised our fair value estimate to S$3.70 (based on 14x FY17F P/E) from S$3.18 against a steadier outlook for earnings across segments and better contribution from Associates/JVs as the group seeks to continue tapping on opportunities. Maintain HOLD at current levels.

Source: OCBC Research - 22 Feb 2017