Wilmar - Earnings upgrade due to better sales volume

CPO price outlook ? stable 2H09 due to the demand dynamic still holding, disappointment production for Malaysia in 2H09 would be the key support to CPO price. Although we concur the view of the production from Malaysia could come lower than 2008, the current price is running ahead of this expectation given the uncertain demand in 4Q09.

Delivering better than sector ASP. Due to its forward selling back in 2008, Wilmar delivered better than sector ASP. This likely to be the case for 2H09.

HKEX listing ? no further info. But base on the listing timeframe, the management team is likely to be call for meeting with HKEX within two months after the submission of application (31 Jul 09). Given its strong branding and good track record, we foresee the application will be a smooth process. Thus, we are expecting the listing of Wilmar's China Operation likely to be in Dec 09 or Jan 10.

We reiterate our BUY on Wilmar International. With the potential HKEX listing, we derived our target price based on sum-of-the-parts (SOTP) valuation. Wilmar's target price will be at S$7.50 based on 17x 2010 PE to its China's operation and retain 15x 2010 PE for its palm oil business. Potential upsides to our price target if the listing PE is higher than our expectation of 17x.

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