Wilmar

Wilmar: Citi hosted management for an investors’ event post 2Q12 results. House see a change in message from the company as mgt shared that it will be more risk averse in the future (i.e. less taking of trading views), which implies reduced earnings volatility in the future. Wilmar’s equity valuation has been severely impacted by earnings volatility from its oilseeds division, which investors have partly attributed to trading views. Note that seasonal strength expected in 2H12 should allow for better financial results and likely mark 2Q12 as Wilmar’s worst qtr. Following stock price weakness, its valuation is at near GFC trough with investors seeing it more as an industrial firm. Equity valuation for Wilmar will likely recover more significantly to reflect more normalized earnings power post two quarters of expected better results and investors being able to better gauge its ability to use scale and logistical advantages to consolidate an overbuilt Chinese oilseeds crushing industry. House maintains Buy with TP $4.08.