Wednesday, September 21, 2011


Wilmar: Citi maintains Buy with $6.30 TP. House note that China’s NDRC decision to put through an allowance for a 5% rise in prices of bottled edible oil last mth has helped; with Aug data indicating a 30% YoY increase in import vol of edible oils (or 8% YoY increase based on 3m average). Soybean imports though remain muted as Aug data indicate a 5% YoY contraction (or 11% YoY decline based on 3m average).

House is looking for vol to be a stronger driver through for Wilmar in 2H11, as China is a major importer of soybeans and edible oils. Wilmar’s oilseeds division had only processed 8.1m MT of oilseeds in 1H11, a decline of 6% YoY, as Cap on prices (and tight credit conditions) across 1H11 have meant reduced margins that have stifled imports as traders shy away. Believe raising price caps may help stimulate some vol growth across 2H11, helping Wilmar to get to 18.5m MT, +1% YoY in oilseeds processed for FY11.

Add that currently strong sugar price levels if sustained imply potential upside in contribution rate from Wilmar’s sugar unit (from house current estimate of 5% of overall profits in FY11). Recent news that other large agri-groups are also considering plans for sugar plantations in Irian Jaya (Papua) is a positive in that some of the required infrastructure may now see govt involvement. Wilmar has plans for a 200k ha sugar cane plantation in Irian Jaya to fit into the Indo govt’s plans to become sugar-sufficient (from a current deficit of 2m MT pa).

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