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

Why YKA listing could catalyse Wilmar’s share price
● We are positive on this as the approval will allow Wilmar to proceed with the listing of YKA.

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.

"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."

-- CGS-CIMB report
The IPO pricing will be based on investor demand and YKA’s 2019 recurring earnings of Rmb4.5bn.

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.

YihaiKerryArowana Wilmar9.20● 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.


Share price: 


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

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