Wilmar

Wilmar: may be in focus today after a series of corporate updates.
i) to acquire the remaining 1.61% stake in Wilmar China (WCL) from Kuok Group entities for HK$1.93 b (~US$250m). Recall that the Kuok Group entities had in Sep ‘09 acquired the same stake in WCL for the same consideration in anticipation of the WCL Hong Kong IPO. JPM notes the current transaction is meant to streamline Wilmar’s ownership structure in WCL since the IPO is no longer proceeding. Given the interested party transaction, believes the price tag may not be relevant nor indicative of WCL’s current intrinsic value, but says this suggests that a near-term spin-off of WCL would be unlikely.

ii) Wilmar also separately announced that it has, together with its JV partners – Kerry Properties (40%) and Shangri-La Asia (25%), decided to terminate their acquisition of the Laobian Project sites in Yingkou City, Liaoning Province, China and recover the deposits paid. The JV Co will still proceed with the Bayuquan District project in the same city.
JPM notes the terminated Laobian project is the bigger of the two property investments, max total invmt of ~US$1.1b (~US$396m by Wilmar). This compares with the Bayuquan project which has 3 sites for residential, commercial and hotel use and has a total gross site area of 200k sm with max total invmt of ~US$386m (~US$134m by Wilmar). Believes the move may be driven by risk management amidst weaker markets, which may lead mgt to refocus on its core agri-commodities business.

iii) According to an article by China Knowledge recently, Wilmar will invest US$208m to start a sugar and grain processing project in Dongguan, Guangdong Province. The project is designed to have an annual output capacity of 1m tons with products including wheat gluten, sugar substitutes and sugar syrup, which is expected to generate Rmb3.5b in operating revenue annually. It also reported that Wilmar will spend US$148m to build a 300 mu production base for fine chemicals in Dongguan. The base is estimated to have an annual output value of Rmb2.03 b.

iv) in an interview with Reuters, consumer pdt maker PZ Cussons updates on its partnership with Wilmar in Nigeria. Cussons expects a US$56m palm oil refinery JV to be operational by 3Q12, as part of its JV co with Wilmar to invest US$612m in Nigeria over the next 5-7 yrs to develop oil pallm plantations that will feed the refinery and reduce import bills. Cussons expects consumer spending in Nigeria to expand after reforms to the banking sector; adds sales grew 20% in the first quarter for the co, which has operated in Nigeria for more than 100 yrs.