Olam, Noble, Wilmar

Commodities Traders results preview by Goldman Sachs: Olam (Buy, TP $2.50): Seasonally weak qtr, lowering earnings 1Q13 is seasonally weak (net profit typically 7-12% of the full year), and market expectations are low, but earnings could surprise if cotton procurement picks up in Australia. Still, we may not see bumper cotton margins in FY2013E as expected previously. Even if deferred FY12 farmer sales are booked in FY2013E, forward sales may not revert to prior levels due to weak demand. House lower Olam’s FY13E EPS by 14.3% on more normalized cotton margins, but 2013E- 2014E forecasts are still 11.3%-12.4% ahead of Bloomberg consensus. Noble (Buy, TP $1.65): Agriculture rebound expected, Energy may disappoint. 3Q12 Agriculture earnings may surge as Brazil’s sugar harvest goes into full swing (harvest typically in 2Q12 but delayed on adverse weather). Industry soybean crush margins in Argentina and China have improved, but seaborne Coal prices have declined 5% QoQ, to the point of production cuts from high cost producers. Noble’s Coal business is relatively resilient, supported by long term contracts, but margins could still be under pressure. House remain positive on Noble and would Buy on any weakness. Wilmar (Neutral, TP $3.25): Market expectations are low, Palm & Laurics trading conditions have improved & Oilseed margins remain challenged, but believe that the worst is over and in fact China industry crush margins have shown QoQ improvement in 3Q12. Also believe that trading conditions in Palm & Laurics have improved considerably with the recent CPO (crude palm oil) price selldown due to: a) Contango in the CPO futures curve, b) Wide CPO discount to soybean oil (good for demand), c) High biodiesel margins. 2H12 earnings could also be boosted by seasonally high Sugar earnings. Overall believe that consensus expectations are too low and Wilmar could potentially surprise on the upside.