Wilmar

Wilmar: UOB Kay Hian upgrades to Buy with $3.80 TP. House foresee 2013 pre-tax margin to be relatively more stable and have better visibility. As Asia’s largest agricommodity co, Wilmar can command better bargaining power in a high-inventory market and enjoy lower raw material prices. Note that Wilmar's positioning for 2013 is much better vs 2012, with potentially more stable earnings. The only division that may show weakness will be its Plantation and Mills divisions due to lower CPO prices. The sugar division should deliver better earnings for 2013 as well. For 2013, sugar sales have mostly been locked in at a higher-then-current-market price. To benefit from the release of oilseeds and vegetable oil reserve in China. The Chinese government started to release vegetable oils from its reserves in early-Mar 13 and is expected to release around 1m tons based on a media report. As the largest oilseed crusher and consumer pack cooking oil producer, Wilmar would bid for these which are usually released from national reserves at a lower-than-market price. Expect the consumer pack sales volume in China will be better with the migration of demand from the loose cooking oil users in the rural areas to small pack cooking oil. Wilmar has also diversified into the sales of flour and rice. Although contribution is small, sales volume has been growing at 65% p.a. for the last two years. Wilmar is also one of the top cooking oil consumer pack player in Indonesia and India through Adani-Wilmar JV.