More clarity on Wilmar China IPO valuation?

Wednesday, September 16, 2009

Strategic investment by the Kuok Group: In an announcement yesterday evening by Wilmar International (WIL), Wilmar China Limited (WCL) – a wholly-owned subsidiary and the entity for the China business IPO – has sold 1.61% of the enlarged issued share capital of WCL for HK$1.93 billion (US$250 million) to 3 entities (Kerry Holdings Limited, Great Cheer Limited and Zheng Ge Ru Foundation) which are members of the Kuok Group. This essentially values WCL at ~US$15.5 billion based on our estimates.

Valuations: The transaction price values WCL at 20x/18x & 19x/17x consensus/J.P. Morgan earnings estimates for FY09E/FY10E based on 50% of WIL’s group earnings (which is derived from China).

Subscribers to top up in the event of better valuation achieved: The announcement further indicated that in the event the valuation obtained in the IPO is higher, the subscribers will be required to top up the valuation difference to WCL while no adjustments will be made if the valuation achieved were equal or lower.

Transaction sets a floor valuation, confirming management guidance: We believe this transaction essentially sets a floor to the valuation of the China business IPO at ~20x P/E which sends a strong signal that the 20-25x P/E valuation range guided by the company is achievable.


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