- Two growth drivers — recovering soybean crushing margins and sugar price rebound — are intact, in our view.
- YTD acquisitions to diversify revenue sources and strengthen position along the food value chain.
- Stay invested despite short-term earnings volatility. Maintain BUY and TP of SGD3.94, set at 15x FY14E P/E.
We continue to believe in Wilmar’s long-term earnings recovery. In our view, its two growth drivers — recovering soybean crushing margins in China and a sugar price rebound — are intact. We forecast an EPS CAGR of 11.8% over FY15E-16E, after a muted EPS growth of 3.8% in FY14E.
Investing for the future
Soft commodity prices of sugar, corn and soybean etc., could present golden opportunities for the acquisition of distress assets. Wilmar has announced several sizeable acquisitions YTD, which would not only further diversify its revenue sources but also strengthen its position along the value chain.
Beyond near-term earnings volatility
We expect short-term earnings to remain volatile. We are looking at a USD185m net profit for 2Q14E, down 15% YoY but up 14% QoQ. But look beyond that for its recovering crushing margins and better sugar prices. Reiterate BUY with an unchanged TP of SGD3.94, based on 5-year average of 15x FY14E P/E.
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