8 August 2008
NEUTRAL Maintained
S$3.94 Target: S$4.60
Mkt.Cap: S$25,160m/US$18,097m
Dry spell..........................oil price of US$120 per barrel.
foreword(序言) is repeated please click here if you want to read
Valuation and recommendation
Maintaining earnings forecasts but target price reduced to S$4.60 from S$5.20. There is no change to our earnings forecasts for Wilmar as we have left our CPO price forecasts intact. Wilmar is set to release its 2Q08 results next Thursday and we expect good results on the back of favourable sales volume and selling prices for both its palm and soybean products. However, we have lowered our target P/E for the group to 19x forward earnings from 22x, to account for rising downside risks for CPO prices. As a result, our target price falls to S$4.60 from S$5.20.
Retain Neutral. Wilmar remains a Neutral as it continues to offer potential returns that would match the market’s. Of the plantation stocks under our coverage, Wilmar is the least sensitive to declining CPO prices, in our estimation, given that the bulk of its earnings comes from the processing of edible oils and oilseeds. We believe that it deserves to trade at higher P/E valuations than its plantation peers due to its dominant position in the global edible oils market, potential merger synergies, and strong management.
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