UOB Kay Hian Research analysts Leow Huey Chuen and Jacquelyn Yow have raised their 4QFY2020 core net profit estimates for Wilmar International to US$350 million ($465.4 million) to US$380 million on the back of better-than-expected contribution from its subsidiary, Yihai Kerry Arawana (YKA).
Leow and Yow have also maintained their “buy” calls on Wilmar with a higher target price of $6.40 from $5.35 previously as they see several “positive factors” supporting the counter’s share price performance.
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This includes the strong performance seen in its China operations, supported by high soybean crushing volume and steady crushing margins, as well as the 370% share price surge in YKA, which translates to a “substantial holding company discount of 80%” based on Wilmar’s 89.99% stake in YKA.
Wilmar is also getting closer to the special dividend of about 6.5 Singapore cents per share from YKA’s IPO proceeds, which is expected to be declared in February and payable in May, note the analysts.
Wilmar will announce its 4QFY2020 results on Feb 22, after market close.
To that, Leow and Yow expect its sugar segment to perform strongly due to its rising raw sugar prices and good white sugar margin.
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“We may see earnings volatility from soybean crushing and palm operations due to the strong surge in prices in November and December 2020,” they say.
They have also raised their FY2020 core net profit estimates by 11.2% to US$1.51 billion from US$1.35 billion, and core net profit forecasts for FY2021 and FY2022 by 18% and 20% respectively, to factor in stronger contribution from Wilmar’s China operations, as well as demand recovery from its other markets, especially in Indonesia, India and Africa.
As at 10.57am, shares in Wilmar are trading 12 cents higher or 2.3% up at $5.34.
