Wilmar International Limited (WIL) reported a pretty muted set of 4Q11 results this morning. For FY11, revenue climbed 47.2% to US$44.7b, or 0.8% shy of our forecast; reported net profit rose 20.9% to US$1.6b; but if we strip away non-operating items and biological assets gains, core earnings would have come in around US$1.52b, or around 9% below our forecast. Going forward, management believes that things should not get worse from here, but it retains a slightly cautious tone, especially towards its Oilseeds & Grains business which is still facing margin pressures in China due to the excess capacity there still. Market appears to be anticipating a much stronger recovery, but not supported by the 4Q11 results and its outlook. In view of the more “risk-on” approach, we have also raised our valuation peg from 12x to 15x FY12F EPS, and this in turns raises our fair value to S$5.15. But given the stock has run way ahead of fundamentals, we downgrade our call to SELL.
Muted 4Q11 results
Wilmar International Limited (WIL) reported a pretty muted set of 4Q11 results this morning. While revenue rose 26.7% YoY to US$11.5b, it fell 12.0% QoQ. Reported net profit jumped 56.9% YoY and 188.3% QoQ to US$500.0m; but excluding non-cash items, core earnings would have come in around US$265.0m. For FY11, revenue climbed 47.2% to US$44.7b, or 0.8% shy of our forecast; reported net profit rose 20.9% to US$1.6b; but core earnings would have come in around US$1.52b, or around 9% below our forecast. WIL declared a final dividend of S$0.031, bringing the total dividend to S$0.061, versus total of S$0.055 last year.
Margins hit QoQ for most segments
Most business segments performed poorly QoQ on the margin front, with the exception of its Consumer Pack segment, which rose 147% QoQ (down 22% YoY) to US$28.1/MT. Profitability for its Palm & Lauric business declined 26% YoY and 31% QoQ to US$20.3/MT, while Oilseeds & Grains fared even worse, down 101% YoY and 98% QoQ to US$0.3/MT. Even sugar saw its Milling margin drop by 47% to US39.5/MT and Processing even showed a loss of US$22.4/MT from US$35.9/MT in 3Q11.
Bottom likely seen but catalysts still lacking
Management believes that things should not get worse from here, but it retains a slightly cautious tone, especially towards its Oilseeds & Grains business which is still facing margin pressures in China due to the excess capacity there. Market appears to be anticipating a much stronger recovery, but not supported by the 4Q11 results and its outlook.
Downgrade to SELL with S$5.15 fair value
We have made minor tweaks to our FY12 forecast. In view of the more “risk-on” approach, we have also raised our valuation peg from 12x to 15x FY12F EPS, and this in turns raises our fair value to S$5.15. But given the stock has run way ahead of fundamentals, we downgrade our call to SELL. We would be buyers around S$5.
Wilmar International Limited (WIL) reported a pretty muted set of 4Q11 results this morning. While revenue rose 26.7% YoY to US$11.5b, it fell 12.0% QoQ. Reported net profit jumped 56.9% YoY and 188.3% QoQ to US$500.0m; but excluding non-cash items, core earnings would have come in around US$265.0m. For FY11, revenue climbed 47.2% to US$44.7b, or 0.8% shy of our forecast; reported net profit rose 20.9% to US$1.6b; but core earnings would have come in around US$1.52b, or around 9% below our forecast. WIL declared a final dividend of S$0.031, bringing the total dividend to S$0.061, versus total of S$0.055 last year.
Margins hit QoQ for most segments
Most business segments performed poorly QoQ on the margin front, with the exception of its Consumer Pack segment, which rose 147% QoQ (down 22% YoY) to US$28.1/MT. Profitability for its Palm & Lauric business declined 26% YoY and 31% QoQ to US$20.3/MT, while Oilseeds & Grains fared even worse, down 101% YoY and 98% QoQ to US$0.3/MT. Even sugar saw its Milling margin drop by 47% to US39.5/MT and Processing even showed a loss of US$22.4/MT from US$35.9/MT in 3Q11.
Bottom likely seen but catalysts still lacking
Management believes that things should not get worse from here, but it retains a slightly cautious tone, especially towards its Oilseeds & Grains business which is still facing margin pressures in China due to the excess capacity there. Market appears to be anticipating a much stronger recovery, but not supported by the 4Q11 results and its outlook.
Downgrade to SELL with S$5.15 fair value
We have made minor tweaks to our FY12 forecast. In view of the more “risk-on” approach, we have also raised our valuation peg from 12x to 15x FY12F EPS, and this in turns raises our fair value to S$5.15. But given the stock has run way ahead of fundamentals, we downgrade our call to SELL. We would be buyers around S$5.
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