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Dismal Results A Prelude To A Sweeter Wilmar?
Tradeable, Tradeable Ideas | 15 May 2014
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By: Raymond Leung
Articles (142) Profile
  1. Wilmar reported dismal results as net profit for the group fell an alarming 48.7% to US$205.8 million from US$416.8 million in 1Q13.
  2. Wilmar suffered from losses posted by its oilseed & grains, and sugar division. Wilmar expects its sugar division to start contributing revenue in 3Q14.
  3. Analysts expect sugar to be the main driver for the group as prices of the commodity begin to bottom out.

Analyst updates on Wilmar International
Analyst updates on Wilmar International

Wilmar International (Wilmar) announced 1Q14 results last week which saw the group report dismal results. The poor results caused Wilmar to fall short of market expectations. Net profit for the group fell by an alarming 48.7 percent to US$205.8 million from US$416.8 million in 1Q13.

The lower results of Wilmar were mainly due to losses that were posted by the oilseed & grains and sugar division. Wilmar explained that the losses that were posted by these divisions are seasonal and are expected to perform better in the next quarter.

A lower soybean crushing rate was seen due to a previously delayed arrival of soybean imports and lower demand due to the outbreak of bird flu in China.

In terms of its sugar business, the negative contributions from that division was not a surprise as the milling season for sugar will only start in 3Q.

According to Maybank Kim Eng Research, Wilmar’s soybean crushing margin is expected to increase in 2Q as prices of soymeal has rebounded by 10 percent following the 14 percent drop in 1Q.

They expect sugar to be the main driver for the group as prices of the commodity begin to bottom out.

However, not all news was bad coming from the latest quarter of Wilmar. Results from the plantation & palm oil mills division were significantly better as prices for Crude Palm Oil (CPO) starts to recover.

A higher crushing margin was seen this quarter and is expected to further grow for the remainder of FY14.

The valuation of Wilmar is currently low as it is trading near the bottom of its 52 weeks range of $3.02 and $3.65. Maybank Kim Eng Research finds Wilmar “cheap” hence, gives it a “Buy” call with a potential profit of 23.5 percent.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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Wilmar Int'l  3.610 +0.01 +0.28%   
Business: Co's integrated agribusiness model encompasses the entire value chain of the agricultural commodity processing biz, from origination and processing to branding, merchandising and distribution of a wide range of agricultural pdts.

Insight: May-19, 1Q19 revenue fell 6.2% to US$10.4b driven ... Read More

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