Commodity Traders

Commodity Traders: Singapore commodity traders will be reporting results in Feb: Wilmar on 12 Feb, Olam on 13 Feb and Noble on 26 Feb. While Maybank-KE does not expect fantastic results, the house opines that Wilmar may outshine the others. Wilmar’s 4Q is seasonally strong, and the house is forecasting a net profit of US$470m (+27% y/y, +11% q/q) for 4Q14, with upside expected from the group’s sugar division. Palm & Laurics margins should remain low, while Soybean-crushing margins might have declined q/q though still positive. Expect a weak 4Q14 for Noble, as feeble iron-ore and coal prices should have weighed on its Metal and Energy gross margins. Expect a q/q decline in agriculture gross profits, weighed by lower soybean-crushing margins. Olam may book a net profit of $140m (+4%), and the house believes that the overall soft commodity prices will hurt upstream operation but mid-stream processing could benefit. Overall, Maybank-KE remains Neutral on the Singapore commodity traders, although Wilmar (Buy: TP $4.08) is its top pick, with the house banking on a structural recovery in soybean-crushing margins and higher sugar ASPs to lift its long-term profits. Maintain HOLD on Noble (TP $1.05) and Olam (TP $2.07), as Noble has a big exposure to hard commodities, now universally under pressure, while Olam’s balance sheet and cash flow remain weak.