Excerpts from DBS report

Analyst: William Simadiputra 

Profiting from external volatility

What’s New
• Solid platform with strong earnings track record

Wilmar

Share price: 
S$4.12

Target: 
S$6.67

• But mispriced as seen as just another palm oil plantation company

• We believe Wilmar earnings should remain relatively steady amid external commodity price volatility and geopolitical tension in 2023

• Maintain BUY with TP of S$6.67


Wilmar Nodeforest1.21
Investment Thesis
Solid platform a shield against external volatility. Wilmar has a strong integrated platform to underpin a steady earnings performance amid external volatility. Wilmar performed well amid the pandemic, geopolitical tensions, and commodity price volatility as it continues to strengthen its integrated and logistics platform.

Wilmar deserves to trade at a premium to plantation peers’ PE multiples. We believe Wilmar deserves to trade at a higher PE multiple vs. its plantation peers, as it has less exposure to raw material price volatility, and earnings downside risk is minimal.

"We believe Wilmar deserves to trade at a higher PE multiple vs. its plantation peers, as it has less exposure to raw material price volatility, and earnings downside risk is minimal."

Wilmar’s packaged consumer products’ margins and earnings can help to buffer its earnings performance when commodity prices reverse.

Undervalued amid strong earnings performance and 
Wilmar’s transition into the consumer space. With its well-established manufacturing and logistics facilities, Wilmar could penetrate further into consumer segments with stronger pricing power such as Condiment and Noodles.

Valuation:
We use sum-of-the-parts (SOTP) valuation methodology to arrive at a target price (TP) of S$6.67, which implies 16.5x FY23F PE.

Wilmar should trade at a higher PE multiple as it enlarges its footprint in the consumer branded products segment, which has more stable margin outlook.


Where we differ:
Wilmar is undervalued amid its transition into a consumer company. We believe Wilmar ex. China operations is undervalued at the current share price, given that these operations could offset YKA’s weak margins amid rising raw material prices.

Key Risks to Our View:
Worse-than-expected margin performance. If Wilmar fails to secure favourable raw materials at a good price, it may not be able to maintain its positive earnings performance.

You may also be interested in:


You have no rights to post comments

Counter NameLastChange
AEM Holdings2.380-0.050
Best World2.480-0.010
Boustead Singapore0.945-
Broadway Ind0.133-0.001
China Aviation Oil (S)0.915-0.010
China Sunsine0.400-0.005
ComfortDelGro1.460-0.010
Delfi Limited0.910-0.005
Food Empire1.320-0.010
Fortress Minerals0.310-0.010
Geo Energy Res0.3200.005
Hong Leong Finance2.480-0.010
Hongkong Land (USD)2.870-0.080
InnoTek0.500-0.020
ISDN Holdings0.295-0.005
ISOTeam0.039-0.001
IX Biopharma0.043-0.003
KSH Holdings0.250-
Leader Env0.048-0.001
Ley Choon0.042-0.002
Marco Polo Marine0.068-
Mermaid Maritime0.143-0.002
Nordic Group0.315-
Oxley Holdings0.088-0.001
REX International0.142-0.003
Riverstone0.780-0.025
Southern Alliance Mining0.475-0.010
Straco Corp.0.485-0.010
Sunpower Group0.210-0.005
The Trendlines0.074-
Totm Technologies0.021-0.003
Uni-Asia Group0.810-0.020
Wilmar Intl3.380-0.110
Yangzijiang Shipbldg1.8100.030
 

We have 686 guests and no members online

rss_2 NextInsight - Latest News