Trailing Behind Peers. This Gap Should Close

• Wilmar (SGX:F34)’s scale and diversification makes it amongst the most geared to benefit from the current commodity cycle. Bad weather, supply chain bottlenecks and the Russia-Ukraine conflict puts earnings upgrade risks on the upside, in our view. However, Wilmar's share price is still trading at a discount to its parts as well as lagging peers. We think these gaps should close as earnings delivery rolls in.

Valuation Gap Between Peers, Itself

• Wilmar’s market cap discount to Yihai Kerry Arawana (YKA) and Adani Wilmar is 42% - the lowest since YKA’s IPO. However, this is still a large discount. Its operations in South-East Asia, Europe and Africa are being ascribed negative value.
• Compared to its commodity trading peers, Wilmar's share price has underperformed by +49% in the past year. Against the palm oil sector, the underperformance is +29%.
• Indeed, Wilmar’s parts have significantly higher intrinsic value compared to the whole of the parent. Management claims they would look at further value unlocking exercises especially from Indonesia and Africa.
• With its peer group trading at 31x forward P/E today vs 21x just 3-months ago, we think the risks of further restructurings are on the upside going forward.

Geared Towards Higher Commodity Prices

• Wilmar’s Plantation & Sugar edge in procuring even during supply scarcity.

Maintain BUY on Wilmar With Higher Target Price

• We raise 2022-23E earnings per share (EPS) forecast for Wilmar by 21-26% on higher best placed to leverage the current commodities cycle. BUY.

Source: Maybank Research - 7 Mar 2022