Wilmar is one of the largest vertically integrated edible-oil processors in the world. The company is a leading refiner of palm oil globally and soybean in the PRC. Wilmar is also the largest provider of branded cooking oils in China, accounting for more than 40% of the market share. In addition, the company also owns the world’s third largest palm oil plantation.
Initiate coverage with a BUY at fair value estimate of S$7.75. Strong fundamentals and financials. Wilmar is Asia’s biggest agribusiness group, with a leadership position in most of the business segments in which it operates. It commands significant bargaining power and good market intelligence in the demand and supply dynamics of edible oils due to its extensive global footprint and superior integrated business model.
China is the key market for Wilmar’s oilseed processing and consumer pack businesses. We estimate that China contributes about 50% of the group revenues and 48% of the group earnings in 2008. In the near to medium term, we believe the impending growth in China will remain a key driver for Wilmar’s performance.
Our sum-of-parts derived target price of S$7.75 offers 19% upside. We believe Wilmar deserves to trade at a premium given its dominant market position in almost all of its businesses and strong management team. The shareholder restructuring and the possible resulting increase in MSCI weighting will be drivers for the stock price. Initiate with a BUY recommendation.
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