Wilmar - Buy by Phillip Capital (07 Sep 09)

Phillip Capital issued a buy call on Wilmar. The report is attached below for your reference. I do not own any Wilmar shares currently:

Wilmar plans to subscribe to part of a private placement by 3A Resources Berhad, a Malaysian food manufacturer. It is looking to invest RM46.2 million for a 16.7% stake in 3A. The private placement is priced at RM0.75 per share, which represents a discount of approximately 22% to 3A’s last closing price on Monday. 3A Resources Berhad is a leading manufacturer of food and beverage ingredients such as caramel, vinegar and soy sauce protein. It is Malaysia’s largest producer of caramel colour and glucose syrup. In addition, the company is the sole producer of maltodextrin in Malaysia.

The proposed private placement will enable both companies to collectively venture into any future overseas investments to explore the setting up of plants in China. As we have mentioned in our previous report, Wilmar hopes to leverage on its extensive distribution network in China to increase its consumer product offerings. Last year, we estimate that China contributes about 50% of the group revenues and earnings. We believe China to remain a key driver for Wilmar’s future performance.

We view the present share price weakness as an opportunity to accumulate the stock. We maintain our BUY recommendation.