Wilmar International: Ever resilient

1Q09 earnings ahead of expectations. Wilmar reported net profit of US$409.9m in 1Q09 (+9.5% q-o-q, +19.2% y-o-y), mainly on the back of strong contribution from the group’s palm and lauric M&P business. Revenues were, nevertheless, lower by 14.9% q-o-q and 30.6% y-o-y to US$4,958.1m, on lower prices and seasonally lower volumes.

Listing of China subsidiaries explored. The management announced their intention to list the group’s China subsidiaries separately in either Hong Kong or Shanghai; although timing wise, a Hong Kong listing may be looked at earlier. We are quite positive on this prospect, as in addition to unlocking value, we believe it would increase the group’s visibility and strengthen its brand equity in China.

Forecasts raised on CPO prices and M&P margin. We upgrade our FY09F and FY10F CPO prices to RM2,300 and RM2,300 from RM1,900 and RM2,000, respectively, to reflect tight vegetable oil supply this year. While we still expect margins to taper off over the following quarters, we have also raised palm & lauric M&P pretax margin to 4.5% from 3.8% on the back of strong results.

Buy rating reiterated. Our changes resulted in revised TP of S$5.15/share (based on DCF, WACC 10.5%, terminal growth rate 3%). While the recent price surge has reflected the good results, we continue to like the group’s ability to deliver; and given 16% upside on our revised TP, we reiterate our Buy call.

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