DBS GROUP RESEARCH, Nov 12
WILMAR'S Q3 2013 core earnings came in at US$391 million or 26 per cent above our mid-range forecast. Including a US$24 million gain from the divestment of Fortune Gas Investment Holdings and other non-operating items, Wilmar posted a net profit of US$416 million, representing 36 per cent of our initial full-year forecast.
Wilmar booked sequentially higher contributions across the board. Seasonal jump in sugar top line, recovery in Oilseeds and Grains merchandising and processing (M&P) margins and higher consumer pre-tax boosted the group's Q3 2013 earnings, partly offset by a drop in associate income and flat plantations contribution.
We adjust sugarcane yields and selling prices higher, and lift Oilseeds and Grains M&P pre-tax margins and also increase consumer pre-tax margins.
Based on these revisions, we raised the counter's target price to S$3.83 (discounted cash flow, weighted average cost of capital 6.8 per cent, risk free rate 3 per cent, market risk 10.7 per cent, beta of one, terminal growth 3 per cent). Rating upgraded to "buy" for 15 per cent total return potential.
BUY
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