SINGAPORE (Jan 16): UOB Kay Hian is maintaining its "buy" call on Wilmar with target price of $4.10 or blended 14 times FY18 earnings, which is higher than its five-year mean.
UOB is pegging the oilseeds and grains division at 20 times FY18 earnings to factor in the potential listing of its China operations. The research house is also valuing the tropical oils division at 15 times FY18 earnings, and the sugar division and other businesses at 10 times FY18 earnings.
In a Tuesday report, UOB analyst Leow Huey Chuen expects Wilmar to report 4Q17 core profit of between US$360 million and 380 million ($476-502 million) on higher contribution from the tropical oils and sugar divisions.
While higher than in 3Q17, the forecast is lower compared to 4Q16 which saw unusually strong contribution from the sugar division and the oilseeds & grains segments.
PBT of tropical oils is largely supported by higher sales volume and a stable margin. Sales volume is expected to have increased on the back of higher upstream production in 4Q17.
Leow expects tropical oils to report higher 4Q17 refining margin compared to 2Q17 and 3Q17 as biodiesel deliveries rebounded and contributed positively to earnings.
In addition, 4Q17 PBT for the sugar division is expected to be higher q-o-q but weaker y-o-y as the strong performance in 4Q16 will not recur as milling volumes peaked in 4Q instead of 3Q.
4Q17 PBT for oilseeds and grains is likely to register a weaker q-o-q and y-o-y on lower sales of consumer packs as festive demand will only come in 1Q18 with Chinese New Year falling in February.
Meantime, UOB understands Wilmar’s plan to list its Mainland operations on China’s A-share market is on track.
Wilmar has completed internal restructuring. The listing application will start after Wilmar China completes the financial year ending Dec.
"Depending on the listing queue, the listing could take pace in 2H19 or closer to 4Q19," says Leow.
Results are scheduled to be released on 22 Feb 18 after market close.
As at 12.08pm, shares in Wilmar are up 1 cent at $3.20.