*Wilmar*

The Jakarta Post reports today that the Indonesian tax authorities have officially commenced a probe into allegations that Wilmar is in collusion with Indonesian tax officials to underpay VAT. Market watchers are anticipating that following today’s press reports, that there will be some kind of closure to the event soon rather than a protracted one.

Wilmar has since provided a vigorous defence of its position, stating that unpaid VAT allegations of Rp 1.9trn were in fact due to permissible refunds when palm oil is exported. The US$3b shave in Wilmar’s market cap from the time of the disclosures is clearly disproportionate to its VAT liabilities. Sentiment wise, institutions generally side the view that Wilmar’s VAT saga was politically motivated and came at a time when the former Indonesia tax head Darmin Nasution was slated as a possible candidate to replace outgoing Finance Minister Sri Mulyani. Closure on the VAT issue could be a re-rating trigger for Wilmar but we would caution on Wilmar’s technicals, which still appear weak. We would be buyers at S$5.15.