Towards Financial Freedom
Wilmar International - Buoyed by sugar in 3QFY13
- We are keeping our HOLD recommendation on Wilmar International Ltd with a higher fair value of S$3.45/share versus S$3.40/share previously. Our fair value is based on a FY14F PE of 13x. We have tweaked Wilmar's FY14F EPS upwards by 2% for housekeeping reasons.
- Wilmar's 9MFY13 results were within consensus estimates and our forecast.
- As expected, Wilmar's net profit rebounded in 3QFY13 after a dismal performance in 2QFY13. This year, the QoQ improvement in 3QFY13 was driven by the sugar and oilseeds and grains divisions instead of palm and laurics.
- In the past, 3Q was usually Wilmar's best quarter due to consumers' buying of palm oil for the Mooncake Festival in China.
- As such, it was a surprise that sales volume of the palm and laurics division (mainly palm oil refining) eased by 1.5% from 6.2mil tonnes in 2QFY13 to 6.1mil tonnes in 3QFY13. We believe that buyers in China could have stocked up early in 2QFY13.
- Pre-tax profit margin of the palm and laurics division slid from US$36.25/tonne in 2QFY13 to US$34.71/tonne in 3QFY13.
- The division has been recording a decline in pre-tax profit per tonne since 1QFY13.
- We believe that this could be due to softening margins in Indonesia resulting from the build-up of palm refining capacity.
- The oilseeds and grains division (mainly soybean crushing and refining) recorded a pre-tax profit of US$116.1mil in 9MFY13 versus a loss of US$32.2mil in 9MFY12.
- Soybean crushing margins have recovered this year, as reflected in the pre-tax profit of US$7.85/tonne in 9MFY13 versus a negative US$2.26/tonne in 9MFY12.
- After being affected by unfavourable weather in Queensland last year, the sugar division's performance has improved in 9MFY13.
- The division chalked up a pre-tax profit of US$107.3mil in 9MFY13 versus a loss of US$6.8mil in 9MFY12 as sugar milling and refining volume surged more than 50% YoY.
Source: AmeSecurities
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