Wilmar International - Selling Wilmar China to Kuok Group at est. 20x FY10 PE

Wilmar International (WIL) has completed the restructuring to transfer all its China operation into Wilmar China Limited. The total number of issued and paid-up shares of Wilmar China Limited is 35,034m of HK$1.00 each, all of which are held by WCL Holdings Limited (100% owned by Wilmar International).

Yesterday WIL announced an issuance of 1.61% of the enlarged issued share capital of Wilmar China for a total consideration of HK$1,933.4m (or HK$3.43/share) to Kuok Group.

Based on the two announcements and our earnings estimate for its China operation (FY10 EPS: 2.23 US cents or HK$0.173), the new shares sold to Kuok Group translated into a FY10 PE of 20x.

If the listing is at FY10 PE of 19.8x or a P/BV of 3.9x (HK$0.91), based on our sum-of-the-parts valuation, WIL's fair value would be at S$8.05 or a potential upside of 25%.

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