Kim Eng on 21 Feb 2014
Core PATMI met consensus estimates but below ours
Wilmar’s 4Q13 revenue was little changed YoY at SGD11.6b but its core net profit saw a 12.0% YoY drop to SGD352.9m. The contraction wasdue to a lower amount of cane crushed in 4Q13, given that most of the crushing took place in 3Q13 due to favourable conditions then.
Investment themes reinforced
Wilmar’s 4Q13 results reinforced our key investment themes, ie, better soybean crushing margin in China and a recovery in sugar business. Thanks to the continually improving soybean crushing margin, its Oilseeds & Grains division posted a 150% YoY PBT growth in 4Q13. On a full-year basis, PBT was 15x more than in FY12. We believe the recovery in this sector will persist in FY14. The sugar business also recorded growth in PBT in FY13, up 26.8% YoY, buoyed by higher volume despite the low sugar price. We expect the sugar division to be an important growth driver for Wilmar in the next few years ascapacity expansion continues and sugar price increases.
Acquires stake in sugar company in India
In a separate announcement last night, Wilmar said it is investingaround USD200m in Shree Renuka Sugar (SRS), a leading sugar company in India. Although SRS is currently loss-making, we think the 1x book valuation is fair and the acquisition comes at the right time as we believe sugar price is bottoming out. Reiterate BUY and TP of SGD4.29 (previously SGD4.30), pegged to 15x FY14E P/E.
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