Wilmar is Asia’s leading agribusiness group, and second largest stock by market capitalisation on the SGX. It is the world’s largest player in the palm and laurics market. It is also has a market leading position in the edible oils market for both the burgeoning economies of China and India.
Wilmar now generates some US$29b in sales and recorded a net profit of US$1.53b in FY08. While we expect lower earnings of US$1.38b in the current financial year from lower commodity prices, the longer term growth story is intact. We are forecasting a relatively staid 3-year earnings CAGR of 5% in the current economic climate, but this is ahead of consensus. We believe the market may raise its outlook on a recovery in China and India.
Wilmar has the most profitable and scalable business model amongst its SGX-listed peers. It has an established distribution network that it can use to grow its existing and new businesses. We are therefore assigning a premium valuation of 18x FY09 PER to the company, which implies 25% upside from its current share price level.
Wilmar may also unlock further shareholder value by listing its China assets in either Hong Kong or Shanghai, where premiums for good quality consumer businesses are significantly higher. According to our calculations, such a move may value the company at US$28.2b, or S$6.33 per share.
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