SINGAPORE (Feb 23): CIMB is maintaining its "add" on Wilmar International for its attractive valuations given the stock trades at 13.3 times earnings and 0.9 times book value.

The group also revealed that it is working on the proposed listing of its China operations and internal restructuring of the operations is largely completed.

In 4Q17, Wilmar's core net profit rose 16% q-o-q to US$374 million ($494 million), thanks to better performance from oilseeds and grains as well as strong performances of its associates.

<hr/><a href="https://www.theedgesingapore.com/wilmar-reports-238-decline-4q-earnings-us4275-mil" target="_blank">See: Wilmar reports 23.8% decline in 4Q earnings to US$427.5 mil</a><hr/>

On the flipside, 4Q17 core net profit fell 37% y-o-y due to weaker earnings from tropical oils and sugar segments and higher taxes.

Cumulatively, FY17 core net profit of US$1.05 billion grew 7% y-o-y and formed 100% of CIMB's and 98% of consensus full-year forecasts.

Wilmar attributed the strong performances in 2017 to its portfolio of high quality agribusiness.

According to analyst Ivy Ng Lee Fang, the group expects to enjoy sustained growth on the back of its integrated business model and projects that its 2018 performance will remain satisfactory.

"We lower FY18-19 earnings estimates by 4-6% to reflect lower contribution from tropical oils and sugar," says Ng, "We also fine-tune our SOP to reflect the latest earnings and balance sheet which results in a lower SOP-based target price of $4.10."

Pretax profit from oilseeds and grains rose in 4Q and FY17 to US$207 million and US$735 million respectively due to higher crush margin as well as sales volumes.

However, 4Q17 profit would have been better if not for the shift in seasonal demand due to the later Lunar New Year celebrations in 2018, which led to lower consumer product sales in 4Q17.

Average pretax profit per tonne for this division rose to US$22 in FY17 from US$8.5 in FY16 due to improved margins from the crushing business.

The other segments of the group recorded a jump in pretax profit to US$87 million and US$242 million for 4Q and FY17 respectively, due mainly to gains and dividend income received from its investment portfolio as well as better shipping and fertiliser earnings.

The group’s associates and JV also did well, registering a y-o-y improvement in 4Q17 and FY17 pretax profit to US$112 million and US$228 million, due mainly to stronger earnings from its China and African investments.

However, tropical oils posted a decline in 4Q17 and FY17 pretax profit due to weaker processing margin and lower biodiesel quota awarded. On top of this, FFB yield fell 22% in 4Q17 due to poor weather.

The sugar division posted higher pretax losses of US$25 million ($33 million) for FY17, due partly to the timing of the new Australia sugar marketing programme, weaker merchandising performance in 1H17 and impairment loss of US$30.6 million for its Australian refinery assets.

As at 11.55am, shares in Wilmar are up 8 cents at $3.12 or 13.5 times FY18 earnings.

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