UOB Kay Hian analysts Leow Huey Chuen and Jacquelyn Yow are keeping “buy” on Wilmar International with an unchanged target price of $6.40.
“Our target price is based on FY2021 earnings per share (EPS) and reflects a blended 26 times FY2021 price-to-earnings (P/E) for China operations and blended 11 times P/E for non-China operations,” they write in a Sept 7 report.
To them, industry data is showing improving operating statistics, which points to a better performance in the 2HFY2021.
See also: Analysts remain positive on Wilmar in anticipation of better 2H21 results
According to Leow and Yow, Wilmar’s current weak share price performance may be attributed to investors who are “overly concerned” on China’s regulatory risk, weak soybean crushing volume and margins as well as the hiccup to the listing of its joint venture (JV), Adani Wilmar Limited in India.
The way they see it, the regulatory risks in China poses a “relatively low risk” to the group as oilseeds and grains, as well as staple food industries are not dominated or monopolised by private enterprises.
On the poor soybean crushing volume and margins in 1HFY2021, Leow and Yow say they expect performance to improve in 2HFY2021 on the back of better sales volume.
On the hiccup to Adani Wilmar’s IPO, the issue that led to the suspension could be linked to the query raised on the foreign portfolio investors in other listed entities of its partner Adani Enterprises Limited.
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To this end, Leow and Yow have kept their core net profit forecast for FY2021, FY2022 and FY2023 at US$1.66 billion ($2.23 billion), US$1.78 billion and US$1.95 billion respectively.
“We like Wilmar for its diversified and integrated business model which has delivered good results performance despite the global uncertainty in 2020 and 1HFY2021 amid the Covid-19 pandemic,” they write.
Re-rating factors to Leow and Yow include Wilmar embarking on value-enhancing mergers and acquisitions (M&As) and better-than-expected earnings.
As at 3.03pm, shares in Wilmar are trading 5 cents higher or 1.21% up at $4.18, with an FY2021 P/B of 1.0 times and dividend yield 3.3%.
