Wilmar

Wilmar: 3Q14 net profit improved 1.5% y/y to US$422.4m, beat street estimates, driven by strong recovery in oilseeds margins, higher FX gains and income from associates. Core net profit US$430m (+10% y/y). Revenue dipped 2.7% to US$11.52b, although sales volume rose across operating segments. Gross margins were lower on Palm & Laurics (P&L) margin contraction and losses from forward exchange contracts, partially offset by higher continued improvement in China crushing margins under Oilseeds & Grains (O&G) and lower feedstock costs in Consumer Products (CP). Sugar milling was upset by rain, but was more than offset by almost double of profit from sugar merchandising and processing. Accordingly, with the exception of P&L (-49.0%, US$108.0m), segmental PBT rose across O&G (+87.5% to US$100.6m), CP (+28.9% to US$75.1m), Plantations and Palm Oil Mills (+49.0%, US$86.3m) and sugar (+4.8%, US$158.5m). Going forth, management expects O&G crushing margins to remain positive and CP contributions to remain stable. However, compressed margins in P&L are likely to persist due to lower production and excess refining capacity in Indonesia. We expect rain-delayed sugar crushing to extend further into 4Q. Management expresses optimism in China, India and Indonesia, as well as Africa despite the outbreak of Ebola. Wilmar trades at 1.33x P/BV and 18.18x trailing P/E