• 18 months est. for China ops restructuring
• Possible listing of China operations
• Flour and rice are key growth areas

Strong Showing for 1Q

Wilmar’s 1Q17 revenue increased 17% YoY to US$10,570m and met 24% of our FY17 forecast. Reported net profit rose 51% to US$361.6m while core net profit rose 40.5% to US$312.6m, which formed 27% of our full-year estimate. The key difference was mainly the gains from investment securities on improved equity market conditions. The overall set of results was attributable to decent performance from Tropical Oils and Oilseeds & Grains segments as well as higher contributions from the group’s China associates.

Looking Ahead for Tropical Oils and Oilseeds & Grains

Looking ahead, the lower CPO prices should be partially offset by higher palm oil production. Management anticipates FY17 production level to be somewhat similar to FY15 level, and with FY18 15% higher YoY. Within the Oilseeds & Grains segment, we understand that crushing margins have stabilized given the consolidation and the industry becoming a more rational one. While there have been signs of crushing margins coming down for 2Q, volume for consumer products are expected to recover and the flour business is envisaged to continue growing.

Possible Listing of China Operations

The group is carrying out an internal restructuring of its China operations with the possibility of a separate listing. We understand that the internal restructuring may take about 18 months. The group’s operations in China tend to contribute ~50% of revenue and ~45% of PBT. For a sense of presence, they are the largest edible oils refiner, a leading oilseed crusher as well as producer of branded consumer pack oils, rice and flour. In particular, the flour and rice businesses are key expansion areas outlined by management.

Positive Long Term Growth Story

As the above proposed listing is still at the evaluation stage, there is no certainty or assurance that it will happen, and we have not factored in any potential gains from this development. We maintain HOLD with fair value estimate of S$3.70, while we like the long term growth story premised on their integrated business model and position to benefit from the rising consumption in key markets.

Source: OCBC Research - 15 May 2017