• Reiterate BUY with a SGD4.75 Target Price, 23% upside with 3% FY19F yield.
• WILMAR INTERNATIONAL (SGX:F34)’s 3Q19 core PATMI of USD419m (-3% y-o-y) is in line, while 9M19 PATMI of USD846m is at 75% of the Street’s full-year estimate.
• We note that the y-o-y decline was due to lower JV & associate contributions. Pre-tax earnings from its three core businesses grew y-o-y. We believe the company’s healthy earnings and China IPO prospects should continue to buoy its share price.

Tropical Oils Mid-and Downstream Business Continue to Helm Earnings Growth in 3Q19

• Pretax profit for the segment surged 24% y-o-y on higher sales volumes and processing margins in the mid-and downstream businesses. This helped to offset the weaker numbers from the plantations unit, which in turn stemmed from lower CPO prices and weaker production yield. See Wilmar Announcements.
• FFB production declined by 6% y-o-y in 3Q19.

Oilseeds & Grains Segment Turned Around

• After three consecutive quarters of pretax earnings being on a downtrend, Wilmar’s oilseeds & grains division finally turned around and delivered 1% y-o-y growth in pretax earnings in 3Q19. This was from a strong 8% growth in consumer pack sales volumes, and improved crushing margins.
• Management noted that crushing margins have improved from 1H19 levels, but sales volume dropped 3% y-o-y as demand continued to be affected by the African swine fever epidemic.

Sugar Division Also Improved

• Sugar division also improved with pretax profit up 9% y-o-y, driven by a stronger performance from the sugar refining business. Sales volumes also surged 31% y-o-y, on ramped-up milling activities in Australia and a pick-up in merchandising.

China IPO Is Still on the Plate

• The group has submitted the prospectus for the proposed listing on the Shenzhen Stock Exchange. The China Securities Regulatory Commission (CSRC) has given its feedback. The group has responded and is awaiting approval or further comments. As we approach the end of 2019, we believe the listing is likely to take place in early 2020.
• We remain optimistic on the Wilmar’s share price performance – given the decent set of results and China IPO prospects. See Wilmar Share Price; Wilmar Target Price.
• Wilmar remains one of the Top Picks in our Singapore coverage universe. See report Singapore Equity Strategy - RHB 2019-10-02: Expectations For The Rest Of 2019.

Source: RHB Invest Research - 13 Nov 2019