Wilmar International's 99.99%-owned subsidiary Yihai Kerry Arawana Holdings (YKA) has received final registration approval for a listing on the Shenzhen Stock Exchange SZSE ChiNext Board from the China Securities Regulatory Commission.
Excerpts from CGS-CIMB report
Analysts: Ivy NG Lee Fang, CFA & Nagulan RAV
We believe this could further catalyse its share price as the listing will help unlock value for the group’s operations in China, which make up around 60% of the group’s earnings.
The next event that investors will be watching out for is the pricing of the IPO.
Wilmar revealed in its earlier briefing that the average P/E valuations of comparables listed in the same stock exchange category is 38x.
Should YKA’s IPO fetch a 38x P/E valuation, we estimate the market cap for YKA to be around US$24.3bn, higher than Wilmar’s current market cap of US$20.1bn.
Implied P/E for YKA at current Wilmar share price is only 19.4x.
● Based on our estimates, if YKA is valued at P/Es of between 23x and 38x, its potential market capitalisation should be between US$14.7bn and US$24.3bn.
We value Wilmar's remaining business (ex-YKA) at 12x-16x to arrive at a valuation of between US$7.4bn and US$9.9bn.
Combining these two parts, we estimate Wilmar's market cap to be in the range of US$22.1bn to US$34.2bn (or S$4.81 to S$7.43 per share), which is higher than its current share price of S$4.30 per share.
Assuming Wilmar (ex-YKA) is valued at 12x P/E, we estimate the implied P/E for YKA at Wilmar’s current share price to be just 19.4x.
Full report here