Wilmar

Wilmar: Deutsche maintains Hold with $4.50 TP after hosting co. in investor’s conference. Note that grp looking at expanding its existing capacity of 7m MT to about 12m MT by the end of 3Q12. Additional capacity is expected to cost some US $100m. The strong refining margins are not likely to sustain in the long run once the additional capacities come on stream. Meanwhile, refining business in Malaysia still loss-making but Wilmar has been able to reduce the losses by running at lower utilization rate. Operating environment remains tough in China. Performance of the oilseeds and grains division has been affected by the overcapacity condition in China as well as untimely trades. Currently, oilseeds capacity in China is expected to increase to 125m MT by end 2012 (less than 50% utilization rate for the industry). It could take another 3-4 years for the industry to absorb the spare capacity. Rice and flour sub-segment is delivering robust volume growth of 40-70% yoy in 1Q12 but profitability remains unattractive due to high advertising cost and the absence of scale economies. Wilmar has raised selling prices of its consumer products in China by about 8% in late March but given the recent decline in commodities prices, further price hikes are unlikely. Stronger CPO production. The average age of its planted area is 11-yearold and given such productive age profile, Wilmar should continue to deliver higher CPO production growth going forward. Co. is only targeting 5,000 ha of new planting in 2012.