Wilmar Int’l

Wilmar Int’l shares may get a boost from expansion into sugar bbusiness via acquisition of Sucragen, the sugar & renewable energy unit of CSR for A$1.75bn, including debt of A$403m. Wilmar will fund purchase using internal resources, bank borrowings and tips the venture to be earnings-accretive from 1st year of consolidation. Effective date of acqn is ! Apr 10 but transaction is still subject to approval of Australia, NZ regulators and expected to be completed end Sep.

Sucrogen generated revenue of A$1.74bn, net profit of A$79m in FY10., translating into a purchase P/E of 17x.Sucrogen is Australia's largest raw sugar producer; 2nd largest exporter of raw sugar globally and a leading exporter to the Asian region. It owns 7 mills in Queensland producing 2.1m MT of raw sugar annually and is the largest renewable energy generator using cane biogass with electricity cogen capacity of 171 MW. The company is also the largest sugar refiner in Australia and NZ with an annual refined sugar prodn capacity of 970k MT; Australia’s 2nd largest producer of fuel ethanol.

The acqn will catapult Wilmar into the sugar business and follows Indofood Agri’s venture into this space last year. Plantation groups increasingly see value in adding sugar to their portfolio given the strong economic and demographic fundamentals driving demand esp in China. The sugar business is also not new to the Kuok family. Mgmt views this deal as a good strategic fit with Wilmar existing agri-business and will work to create synergies and to pursue growth strategies in Indon and other Asian markets, utilising Sucrogen’s proven expertise across the entire sugar value chain and market-leading position in Australia. Credit Suisse has a $6.80target price for this stock.