To recap, the holding companies of Wilmar are being liquidated because they no longer serve their purposes following the injection of related-party assets into Wilmar. We also gather that the streamlining exercise is not due to major shareholders of WIHL wanting to sell down their stakes in Wilmar. So far, there has been no indication by any of the major shareholders of their intention to reduce their stakes in the company. We expect ADM to remain a major shareholder as Wilmar offers exposure to the oilseed and edible oil business in Asia.
Overall, we are neutral on this news as concerns of a potential short-term share overhang from minority shareholders of WIHL and WHPL are offset by a higher free float for Wilmar, which could help to improve its weighting in MSCI or FSSTI.
Maintain Outperform. We continue to believe that the streamlining of the shareholding structures does not necessarily signal plans by major shareholders to pare down their stakes in Wilmar, resulting in a share overhang as feared by the market. We see this move as a necessary step since the holding companies no longer serve their purposes.
There is no change to our earnings estimates or target price of S$3.68, based on an unchanged target forward P/E of 15x. Maintain Outperform on Wilmar for its strong management, solid business model and earnings resilience relative to peers. Wilmar remains our top pick for exposure to the plantation sector in the region. Key re-rating catalysts could include potential M&As, better processing margins for its core products and a potential increase in weightings in major indices.
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