• Reiterate BUY with a higher Target Price of SGD3.69, from SGD3.51, 14% upside.
• Wilmar is our Top Pick in the regional plantation sector. As the largest downstream player in the palm oil processing space, Wilmar continues to be a key beneficiary of an improving biodiesel and oleochemicals demand.
• Moving into FY19F, we believe the IPO of Wilmar’s China operations will be a key catalyst.

Downstream Margin to Hold Up Tropical Oils Division Over the Next Twelve Months

Wilmar’s downstream margin turned around in 2Q18 which is in part due to a rising demand for biodiesel on the back of a positive spread between gasoil and CPO.

Moving into FY19F, we note the Indonesian Government is pushing for higher biodiesel blending while discretionary demand from EU has also picked after removing anti-dumping duties. We believe these factors will continue to support the demand momentum going forward.

Since the margins for biodiesel are higher than those of palm oil refining, we expect Wilmar’s overall processing margins to be higher in FY19.

Source: RHB Invest Research - 15 Aug 2018