Wilmar deserves higher multiples as decade of investments pay off, says DBS

It has been a good start to the year for Wilmar International, as the plantation stock continues to set five-year highs in terms of share price. But according to DBS analysts William Simadiputra and Woon Bing Yong, the counter deserves a higher valuation multiple on the back of stronger food demand. They have maintained their “buy” call with a higher target price of $6.67 from $5.28  previously.

“We believe Wilmar could top our expectations in 4QFY2020. We have also raised Wilmar’s FY21F earnings to US$1.48billion ($1.96 billion), as we expect Wilmar to benefit from strong food demand despite higher input cost potential amid current high commodities price,” say the analysts in a 21 January broker’s report. Their FY2021 and FY2022 earnings forecasts have been raised by 7% each. 

The DBS duo sees Wilmar’s valuation further re-rating after Yihai Kerry Arawana (YKA)’s successful listing and Wilmar’s 3QFY2020 earnings performance. It will continue to benefit from supply chain investment in China and the wider Asian reason. There is also available installed capacity to match growing food demand, especially with Chinese New Year coming in February.