By Carey Wong
Tue, 2 Mar 2010, 09:53:06 SGT

Wilmar International Limited (WIL) posted its FY09 results over the weekend, which were mostly within expectations; revenue down 18.0% but net profit up 22.9%. WIL has also declared a final dividend of S$0.05 per share (vs. S$0.045 last year), payable on 20 May 2010, bringing the total FY09 payout to S$0.08 (vs. S$0.073 in FY08). Going forward, WIL remains upbeat about the economic activities in Asia, especially in China, India and Indonesia; management intends to spend no less than US$1b on capex to expand its operations here. Meanwhile, WIL is considering expansion into other related agri-businesses such as sugar plantations and mills – likely to be in Indonesia - as management sees good prospects in this area; however, it is more likely a 2011 story. We are keeping our FY10 estimates intact as FY09 results were mostly in line with our estimates. Maintain BUY with an unchanged fair value of S$8.23 (based on 20x FY10F EPS).

FY09 results mostly in line. Wilmar International Limited (WIL) posted its FY09 results over the weekend. Revenue fell 18.0% to US$23885.1m, or about 6.8% shy of our FY estimate, but no surprises here due to lower commodities prices. However, net profit jumped 22.9% to US$1882.0m, underpinned by strong earnings posted by its Oilseeds & Grains, Consumer Products and Plantations & Palm Oil Mills divisions; and if we strip out the fair value adjustment from biological assets, core net profit of US$1865.0m was almost spot on our US$1859.6m forecast (this already includes the exceptional net gains of US$167m arising from the sale of new shares in Wilmar China Limited). WIL has also declared a final dividend of S$0.05 per share (vs. S$0.045 last year), payable on 20 May 2010, bringing the total FY09 payout to S$0.08 (vs. S$0.073 in FY08).

Spending US$1b for pan-Asia expansion. Going forward, WIL remains upbeat about the economic activities in Asia, especially in China, India and Indonesia; management intends to spend no less than US$1b on capex to expand its operations here. While WIL did not give a detailed breakdown, we understand that increasing its plantation assets in Indonesia will be a priority (both via new planting and acquisitions); it also intends to increase its refining and crushing capacity there to cater for the higher CPO output. Over in China, WIL intends to increase its flour and rice milling business; this as it sees growing demand for high quality processed agricultural and consumer products due to rising affluence and rapid urbanization there.

Sugar plantations – new growth focus. Meanwhile, WIL is considering expansion into other related agri-businesses such as sugar plantations and mills – likely to be in Indonesia – as management sees good prospects in this area. A recent Reuters article noted that the International Sugar Organisation has increased its forecast for the global sugar deficit in 2009/2010 from a previous estimate of 7.2m tons to 9.4m tons. However, management says that it will be taking small steps in this new area and will continue to do feasibility studies; as such, it will not be investing a lot yet and this is more likely a 2011 story.

Maintain BUY with S$8.23 fair value. We are keeping our FY10 estimates intact as FY09 results were mostly in line with our estimates. Maintain BUY with an unchanged fair value of S$8.23 (based on 20x FY10F EPS).