CIMB: Wilmar 3Q numbers beat estimates

KUALA LUMPUR (Nov 9): CIMB Investment Bank says Singapore-listed Wilmar International Ltd's third quarter (3Q) financials have beaten the research firm's estimates but came in within street forecast.

According to CIMB analyst Ivy Ng Lee Fang, the cumulative nine-month core net profit of agriculture-based Wilmar made up 81% of the research firm's full-year forecast for financial year ending Dec 31, 2012, and 75% of consensus estimates.

"We are positive that the oilseeds and grains division managed to return to profitability in 3Q, but it is unclear if this is sustainable as the operating environment for the oilseeds crushing business in China remains challenging due to excess capacity.

"Overall, we still expect 4Q earnings to be weaker due to lower CPO [crude palm oil] and sugar production," Ng wrote in a note today (Friday).

The analyst said 3Q is usually the strongest quarter for Wilmar, which is an 18%-owned unit of PPB Group Bhd. These companies are controlled by Malaysian tycoon Tan Sri Robert Kuok.

Ng said while the market is anticipated to respond positively to Wimar's latest financials, CIMB is maintaining its earnings forecast for the company pending further updates from Wilmar, hence, keeping its "neutral" call and target price of S$3.32 for the stock.

She said while Wilmar shares appear to be supported at a price-to book value ratio of 1.2 times, the stock, however, lacks strong catalyst.

In a statement today, Wilmar said its net profit rose 26% to US$405.8 million (RM1.24 billion) in the 3Q ended Sept 30 from US$321 million a year earlier as most key segments of its business registered higher profits during the quarter. Revenue was, however, down 6% to US$12.35 billion from US$13.09 billion a year earlier.

Despite lower profits at its oilseeds and grains unit, Wilmar said the division had turned around following two quarters of losses.

Wilmar chairman and CEO Kuok Khoon Hong said the group registered satisfactory results despite difficult market conditions especially in the oilseeds and grains business.

"Despite the uncertainties in the global economy, the group remains positive on its long-term prospects due to good economic growth in its main markets of China, India and Indonesia, continued increase in the production of palm oil in Indonesia, coupled with new projects developed in the past few years like oleochemicals, rice and flour milling,” Kuok said.

Wimar said cumulative nine-month net profit fell 29% to US$778.7 million from US$1.1 billion a year earlier while revenue rose 2% to US$33.84 billion from RM33.19 billion. According to a Reuters report on Friday, Wilmar's 3Q net profit has beaten street average estimates of US$335 million, based on a Reuters poll of five analysts.

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