UOBKayhian on 15 Sep 2015
FY15F PE (x): 9.3
FY16F PE (x): 8.5
Wilmar’s share is oversold on the concern of losing its net interest income advantage as
interest cost normalises. The narrowing interest rate spread is well within expectation
and Wilmar has reduced this exposure. Core business has been performing well with
improving refining and crushing margins, while consumer pack has exhibited volume
growth, and sugar is back to profit. Short selling volume hit 50% of total traded volume
while the aggressive buyback was done at 0.8x P/B only. Maintain BUY. Target price:
S$3.60.
Wilmar’s share price has weakened over the last three weeks by 12% on the concern of
lower interest income due to interest cost normalisation. In the past two years, Wilmar
has taken the advantage of lower cost of USD borrowing and placed US dollar
denominated deposits in the China onshore market to enjoy the positive interest rate
spread.
We maintain our forecasts, which assumes net profit growth of 9.5% 3-year CAGR
(2014-2017). We are expecting the growth to be driven by its downstream operations in
Palm and Soybean. Maintain BUY. We maintain our SOTP-based target price of
S$3.60. Our key assumptions for the SOTP include 15x PE for its palm upstream,
consumer pack and sugar divisions and 13x for its palm refining and soybean crushing
and 10x for the rest of operations. The SOTP target price translates into a blended PE
of 12x and 11x 2015F and 2016F PE respectively.
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