Wilmar

Wilmar: Maybank-KE expects Wilmar's soybean-crushing margins in China to improve from FY15 onwards, and remains as the top sector pick with TP of $4.08. Since the Qingdao port scandal in Jun '14, China's monthly soybean imports has been slowing to single-digits growth, potentially caused by tighter credit controls. The house opines that in the longer term, stricter controls would lead to reduced speculative trading and benefit real soybean crushers like Wilmar. However in the near term, house expects 4Q margins to be weak, owing to: 1) Higher-than-usual US soybean shipments to China; 2) An 8% drop in soybean meal prices since mid-Nov; and 3) A narrowing premium for China’s domestic soybean prices over CBOT’s. The counter currently trades at a forward P/E of 13.4x, below its 5-year average of 14.6x.