Wilmar registered a 1.9% YoY rise in revenue to US$10.8b but saw a 436.6% increase in net profit to US$316.4m in 2Q18, bringing 1H18 net profit to US$516.7m (+29.6% YoY). 1H18 earnings accounted for about 46% of our full year estimates, in line with expectations.

Oilseeds and grains saw the greatest increase in pre-tax profit at 72.7% in 1H18, followed by associates’ contributions at 52.1%. The US-China trade tensions improved margins in the short term, thus benefitting Wilmar’s oilseeds crushing business. However, a prolonged dispute will have a negative impact on the crush margins due to lower plant utilisation.

Nevertheless, management expects its other businesses such as consumer products, rice and flour milling to “perform reasonably well” in the coming quarters. An interim dividend of S$0.035 has been declared, vs. S$0.03 last year.

Pending an analyst briefing, we maintain our BUY rating but put our fair value estimate of S$3.51 under review.

Source: OCBC Research - 14 Aug 2018