Towards Financial Freedom
Wilmar International - Out of the woods HOLD
- Maintain HOLD on Wilmar International Ltd, with an unchanged fair value of S$3.74/share. Our fair value implies an FY13F PE of 14.7x.
- Wilmar's FY12 results were within consensus estimates but above our forecast due to a better-than-expected performance from the sugar division.
- The division recorded a pre-tax profit of US$106.7mil in 4QFY12, which is close to 3QFY12's US$101.3mil as an increase in sales volume compensated for lower selling prices.
- Wilmar's palm and laurics merchandising and processing division continued to benefit from Indonesia's export duty structure in FY12. It remains to be seen if the margins can be sustained in FY13F.
- Pre-tax profit margin of the division improved from US$28.85/tonne in FY11 to US$33.36/tonne in FY12. On a quarterly basis, pre-tax profit margin of the division was steady at US$30.11/tonne in 4QFY12.
- Interestingly, sales volume of the palm laurics division expanded more than the oilseeds and grains processing division's (comprising mainly soybean crushing and refining) in FY12.
- Wilmar sold 13.8% more palm products in FY12 compared to a decline of 1.9% for the oilseeds division.
- Oilseeds and laurics processing division stayed in the black in 4QFY12. However, pre-tax profit margin of the division eased from US$11.50/tonne in 3QFY12 to US$8.71/tonne in 4QFY12.
- Consumer products division (mainly cooking oil, flour and rice) recorded a 4.8% increase in revenue and an 84.3% climb in pre-tax profit in FY12.
- We believe that the division benefited from the low cost of feedstock used to produce cooking oil. Pre-tax profit margin of the division strengthened from US$19.40/tonne in FY11 to US$34.12/tonne in FY12.
- Plantation division's pre-tax profit declined 44% from US$733.4mil in FY11 to US$410.8mil in FY12. We estimate Wilmar's average CPO price realised at US$905/tonne (RM2,795/tonne) in FY12 compared with US$1,036/tonne (RM3,168/tonne) in FY11.
Source: AmeSecurities
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