Wilmar - Need To Expedite

Monday, September 14, 2009

A Department director of China’s National Development & Reform Commission yesterday warned that the soy crushing capacity in the country is “far larger than needed”, suggesting Beijing could push for consolidation in the sector.

(About half of the 80 mln tones of annual soy crushing capacity were not operating in 2008, vs 44% utilization in 2007. The situation is unlikely to improve in 2009, hence the need for consolidation.)

Wilmar is the largest in China with daily average capacity of 32,000 tonnes, vs state-owned COFCO’s 17,100 tonnes. As China had earlier restricted expansion by Wilmar, the latest news should not affect it that much.

Even so, it should expedite the listing of its China operations in Hong Kong. (It has been 4 months since Wilmar first confirmed such plans.) Indications are that the IPO by end ’09 is on track.

We have a Trading BUY on Wilmar, pending the HK listing, and despite its “rich” valuation. At $6.50 (market cap of S$41.19 bln), Wilmar is on 17.5x latest 12 months earnings of US$1643.34 mln / S$2347.62 mln.


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