Wilmar

Wilmar chalked in a strong 3Q13 results which was largely in line, as net profit came in at US$416.0m (+3% y/y, +90% q/q) and revenue at US$11.8b (-4% y/y, +14% q/q). The result brings 9M13 earnings to US$949.9m (+22%). Most key segments recorded volume growth and higher profits during the period, although the Plantations & Palm Oil Mills division continues to be affected by lower production yield and average selling price for crude palm oil (CPO). Associates also turned in a weaker performance in 3Q2013 Going forward, the group notes that its investments in recent years in capacity expansion, new businesses and downstream products have enabled Wilmar to realize volume growth and to maintain margins amidst low CPO prices. Aims to remain focused on improving its business model and are positive on being able to capture growth opportunities and to grow profit as the global operating environment stabilizes. Overall fundamentals remain firm with net gearing improving to 0.81x from 0.85x as at Dec12, while the group recently completed a loan syndication of US$2.07b, the bulk of it with 5-year tenure, which will further extend the group’s debt maturity profile. At its current price, Wilmar trades at 12.1x forward P/E versus Singapore peers simple average of 20x. More updates will be provided following the group’s analyst briefing this afternoon. Latest broker ratings as follows: Maybank-KE maintains Buy with TP $4.30 CIMB maintains O/p with TP $4.12 CS maintains Hold with TP $3.73 Deutsche maintains Hold with TP $3.70 OCBC maintains Hold but place TP $3.33 under review Key segmental breakdown summary as per follows: - Oilseeds & Grains registered a 7% increase in sales volume to 5.6m MT, supported by higher demand for soybean meal and flour. Crush margin was strong due to the delayed arrival of soybean from South America and shortage of alternative meals. This resulted in a pretax profit of US$53.7m in 3Q13 (-11%). - Consumer Products posted a 14% increase in sales volume to 1.5m MT, due to stronger demand for edible oils and flour which buoyed sales volume. Pretax profit rose 20% to US$58.3m. - Plantations & Palm Oil Mills saw a -50% in pretax profit to US$57.9m due to lower margins from lower production yield and average selling price. Production yield was down 9% to 4.5 MT per ha as a result of low crop trend in Sarawak, delayed peak harvest season for Sabah, as well as dry weather in Kalimantan and Sumatra. - Sugar reported a significant 49% increase in pretax profit to US$151.2m, on the back of good crushing volumes in Australia. - Milling reported a pretax profit of US$127.5m (+69%) due to higher volume of cane crushed as a result of dry and favorable weather conditions in Australia. Sales volume increased by 56% to 1.9 MT, and as at 9M13, the group has crushed ~80% of the 2013 season versus ~60% y/y. - Merchandising & Processing achieved a 32% increase in sales volume to 1.5m MT from higher merchandising activities in 3Q13. Pretax profit decreased marginally by US$2.0m to US$23.7m. - The Others segment recorded a pretax profit of US$26.8m in 3Q13, buoyed by a significant gain of US$24.0m from the disposal of a strategic stake in Fortune Gas Investment Holdings and also net gains from other investment securities. - Associates saw a decline of 83% to US$8.2m due to lower contributions from India and China. This was partially offset by the first inclusion of the Group’s share of profits from its new Sugar associate in Morocco, Cosumar, which was acquired in Apr13.