Wilmar International - Saving the best for last

FY12 core EPS was 10% ahead of our forecast and 5% ahead of consensus on a better palm & laurics performance and lower effective tax rate of 12% in 4Q. Profits from its oilseeds & grains division were also commendable.

4Q core EPS was the best in 2012 thanks to a strong palm & laurics division. A final dividend of S$0.03 beat our S$0.01 expectation. We keep our EPS and SOP-based target price pending today's briefing. Maintain Outperform with catalysts expected from its continued earnings recovery in FY13.

Main surprises in 4Q
4Q12 core jumped 51% yoy and 3% qoq with higher contributions from its palm & laurics segment. This vindicates our view that palm & laurics will benefit from high palm-oil stock. 4Q’s effective tax rate was below our forecast on higher profits from entities in lower-tax jurisdictions. 

The group also booked a US$42.3m net gain from investment securities and US$21.3m of positive changes in the fair value of biological assets in 4Q, which have been stripped out as non-core items. Other divisions performed broadly in line. The group also announced plans to acquire a 53.7% stake in Noble Plantations to develop and run estates jointly in Papua, Indonesia with Noble. We are neutral on this as the investment is not expected to add much to near-term earnings.

Better times ahead
We expect better performances in FY13 as palm & laurics should benefit from expanded refining capacity, current high stock and a new export tax policy in Malaysia. Consumer products should also gain from lower feedstock costs while the oilseeds & grains business is expected to enjoy better margins.

Maintain Outperform
The 4Q strength marks the start of its earnings recovery in most segments. (Read Report)

Source : CIMB Research

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