DJ: Wilmar falls 3.4% at 14:51pm

DJ MARKET TALK: STI +0.6%; Wilmar Falls 3.4%, NOL +3.6%
1/4/2011 2:51:00 PM

0651 GMT [Dow Jones] The STI is +0.6% at 3254.11, off its earlier 3260 high, but is likely to remain in positive territory as sentiment remains upbeat with regional bourses mostly higher, and DJIA futures pointing north amid increased optimism over the health of the U.S. economy. 1.66 billion shares have been traded worth S$1.25 billion, with gainers pipping decliners 263 to 220 on the broad market. With the STI breaking above resistance at 3220 Monday, and trading above psychological 3250, analysts mostly agree that 3300 is the next key level on the upside.

Wilmar (F34.SG) is down 3.4% at S$5.47 in heavy trade after JP Morgan downgrades the stock to Underweight from Overweight and slashes its target price, citing competition in China, overly optimistic consensus earnings, and worries over its intended deviation into property.

Publish Post

the most active stock today is Top Global (519.SG), flat at S$0.015. (matthew.allen@dowjones.com)

DJ MARKET TALK: JPM Cuts Wilmar To Underweight; Target S$4.60
1/4/2011 10:37:00 AM

0237 GMT [Dow Jones] STOCK CALL: JPMorgan downgrades Wilmar International (F34.SG) to Underweight from Overweight and slashes its target price to S$4.60 from S$7.20. Says the stock is likely to underperform near term due to a regulatory overhang and competition in China; also cites an overly optimistic consensus earnings estimates and likely lackluster earnings momentum, while investors may accord a lower P/E multiple for its intended deviation from the core business. Reduces FY11/FY12 earnings forecasts by 5.3%/7.3% as the house lowers oilseeds crushing and consumer products margin assumptions; it also reduces the target P/E multiple to 14X from 20X. Says Wilmar's deviation from its core business may attract a "conglomerate discount." Adds future property projects under its JV with Kerry Properties and Shangri-La "could see more capital reallocated to property investments than reinvested in its core agri-commodities business in future...this may lead to a lowering of the P/E that investors are willing to accord the stock." Stock off 0.2% at S$5.65. (matthew.allen@dowjones.com)

BT: Wilmar's property foray - best to keep open mind

Business Times - 04 Jan 2011

Hock Lock Siew
Wilmar's property foray - best to keep open mind

By FELDA CHAY

THERE is an adage that a company should concentrate on what it knows best. So it comes as no surprise that the market has cast a negative eye on palm oil giant Wilmar International's recent forays into the Chinese property market - two activities that are said to be as different as cheese and chalk. Some even worry that the move could be a signal of a bad spell in the group's core agri-business. However, it is premature for sceptics to write off the new ventures as, with the collaboration of experienced partners, they could well turn out to be a lucrative business.

Wilmar, which is headed by 'sugar king' Robert Kuok's nephew Kuok Khoon Hong, announced that it was entering the Chinese property market two weeks ago. It will pump in a maximum 889.2 million yuan (S$173 million) to develop three residential, commercial and hotel sites in China's Yingkou city. Its project partners are Shangri-La Asia (SA) and Hong Kong- listed Kerry Properties (KPL) - two companies that are related to Malaysia's Kuok Group. It followed up by announcing last Wednesday that it will enter into a joint bid with KPL and SA for six plots of land, also for residential, commercial and hotel developments in Yingkou city. This time, Wilmar will be investing up to 2.63 billion yuan.

The market's reaction to the deals has been largely negative. The day after the first announcement, Wilmar's shares, which some say have been correcting amid China's consumer price cooling measures, fell 5 per cent to $5.62. The stock was caught in a rut before recovering some lost ground, ending three cents higher at $5.66 yesterday amid bullish trading in the first market day of the new year.

Analysts appear to worry that the group has lost its business focus. Yet, it is not the first company to diversify from its core business. A good example, in the commodity sphere, would be The Straits Trading Company, whose core business was, and still is in tin smelting, but went into a whole host of other ventures in the late 1990s such as property holding and development and even media advertising.

Deciding factor

The point is, just because a company decides to dip its fingers into something else, doesn't mean that it has lost its focus. In fact, around the time that Wilmar first announced its foray into the Chinese property market, the group also said that it was partnering UK-based PZ Cussons plc - which is listed on the London Stock Exchange - to set up a palm oil refinery and food ingredients business in Nigeria, in which Wilmar will invest US$27.5 million. And it recently completed the acquisition of Australian raw sugar exporter Sucrogen Ltd for US$1.8 billion. Clearly, Wilmar remains very much focused on the agriculture front. The deciding factor to consider in this, and other cases, is whether the diversification would destroy, or enhance, shareholder value.

In Wilmar's case, there are several factors that could act in its favour. If there are fears that Wilmar is a stranger to the property business, then consider its partners. Both are seasoned real estate players. KPL, for one, is a long-standing player in the Chinese property market. Properties it holds include hotels, commercial and residential developments, with many a mix of the three. It has a presence in China's top cities such as Shanghai and Beijing, as well as cities such as Hangzhou, Tianjin and Chengdu. In KPL's fiscal year 2009, about 34 per cent, or HK$1.5 billion (S$247.6 million), of its net profit came from mainland China. Hong Kong and Singapore listed SA is also well-established in China, having developed numerous hotels there.

Experienced operators

Wilmar brings something to the venture too. Its role in the tie-ups, as stated by the group in its announcement last Wednesday, lies in 'sourcing of suitable sites and the implementation of the projects' in Yingkou city - where it currently has an oilseed- crushing plant. Having established its operations in Yingkou and other Chinese cities, its partners are hoping to ride on its network and knowledge in the country and expand further. In the words of Wilmar: 'The brand recognition of KPL's properties and SA's hotels, together with their expertise in operating and managing such properties, will further enhance the value of the joint venture.'

Right now, the market is taken up by the risks associated with the diversification. But if the ventures succeed, the returns could be substantial, given the potential of the Chinese market. Nothing should be taken for granted, obviously, but Wilmar has mitigated some of the risks by partnering companies which are experienced operators. It has a decent chance of succeeding. So while it might be hard to associate Wilmar with hotels, apartments and office buildings, don't be surprised if there's increasing mention of contributions from these non-core activities in future earnings reports. As in most things, it's best to keep an open mind, for now at least.

BT: Wilmar in joint bid for more China sites

Business Times - 30 Dec 2010

Wilmar in joint bid for more China sites

Wilmar, together with Kerry Properties and Shangri-La Asia, could invest up to 7.5b yuan in the project

By FELDA CHAY

FRESH from the successful bid for three plots of land in China's Liaoning province, Wilmar International, together with Kerry Properties and Shangri-La Asia have struck again.

This time, the trio are planning to enter a joint bid for six sites in the province that could see a total investment of 7.5 billion yuan (S$1.4 billion), with Wilmar to pump in up to 2.63 billion yuan.

This is based on Wilmar's shareholding in the joint venture (JV) firm that will be set up to see the project through, if the trio's bid is successful.

According to Wilmar's announcement after the market closed yesterday, it will hold a 35 per cent stake in the JV, while Kerry will take up 40 per cent. Shangri-La will have the remaining 25 per cent.

Wilmar said that it will fund the project using internal sources of funds and bank borrowings. It does not expect the investment to have a material impact on its financial position.

The three have paid an aggregate deposit of 271.6 million yuan to the Chinese authorities to qualify for the public bid, which will be held next Wednesday.

Wilmar has contributed 95.1 million yuan to pay for this deposit, while its partners Shangri-La and Kerry have forked out 67.9 million yuan and 108.6 million yuan, respectively.

Kerry and Shangri-La Asia are both linked to Malaysian billionaire Robert Kuok, while Wilmar is controlled by Mr Kuok's nephew.

Located in Yingkou city, the six pieces of land are designated for residential and commercial purposes - which will be granted land use rights of 70 and 40 years, respectively. They have a total gross site area of 6.1 million sq ft.

The joint bid comes after the trio bought three pieces of land in Liaoning province earlier this month for 240 million yuan, with the aim to pump in up to 2.57 billion yuan into the entire project.

Wilmar will own 35 per cent of this project, while Kerry and Shangri- La will respectively take up 40 per cent and 25 per cent.

The news sparked a sell-off in Wilmar's shares, as investors questioned the commodity firm's decision to diversify into property.

DMG said in a research report then: 'We fear this could mark the start of Wilmar's loss of business focus and corporate discipline, and do not think the venture will be well received by the market.'

Wilmar, however, appears unfazed by these worries. The firm said in its statement yesterday that it is 'in the process of searching for other suitable sites in China and may jointly bid for such sites in the future' with Kerry and Shangri-La.

In November, Wilmar said that its third quarter net profit plunged 60.3 per cent year-on-year due to the weaker performance of its oilseeds and grains division, and the absence of a big one-time gain.

Net profit for the period ended Sept 30 was US$259.5 million. In the corresponding period last year, Wilmar registered US$652.9 million in earnings, partly buoyed by a net exceptional gain of US$167 million from the sale of new shares by its Wilmar China unit.

Yesterday, its shares closed 1.1 per cent higher, or six cents, at $5.69.

DJ Market news: Wilmar

DJ MARKET TALK:Wilmar Down 0.5%;S/T Performance May Be Capped-UOB
12/30/2010 9:25:00 AM

0125 GMT [Dow Jones] Wilmar (F34.SG) is down 0.5% at S$5.66 after the company announced it's forming a 35:40:25 JV with the China units of Kerry Properties (0683.HK) and Shangri-La Asia (0069.HK) to bid for six sites in Liaoning province again, with a potential total investment of CNY7.5 billion (US$1.1 billion); Wilmar will inject CNY2.63 billion (US$394 million). The sites are designated for residential and commercial purposes with a total gross area of 6.1 million sq ft. UOB KayHian, which has a Buy recommendation and a S$7.10 target on the stock, says its 5.1% fall the day after its first property investment announcement (Dec. 21) "is a clear indication that investors do not like Wilmar's diversification into non-commodity business...(it) could be seen as the start of Wilmar's loss of business focus." The house adds that its short-term performance could be capped by the negative reaction over new property investments and the regulatory risks in China, but it awaits a meeting with the management Jan. 7 for more clarity. Tuesday's low at S$5.56 may support near-term. (matthew.allen@dowjones.com)

DJ: Wilmar

DJ MARKET TALK: Wilmar Off 0.9%; Property Concerns Seem Priced In
12/30/2010 10:54:00 AM

0254 GMT [Dow Jones] Selling in Wilmar (F34.SG) could be tapering off judging from its modest decline following its latest move to venture more deeply into property development. The stock is off 0.9% at S$5.64 in light volume, after losing 3.9% since December 21, when it first unveiled its entry into China's property market with Kerry Properties (0683.HK) and Shangri-la Asia (0069.HK), and down 17.3% from the November S$6.88 peak. Support is at this month's S$5.56 low. Any sustained recovery will, however, depend on whether 4Q10 margins recover from their 3Q10 weakness; results will be known around February. Wilmar's latest move with both partners involves bidding for six sites for residential and commercial use in Liaoning's Yingkou City, where they already have 3 land parcels. "Operational and execution risks from the property ventures are likely to be minimal due to the strength of Wilmar's joint venture partners," says AmResearch; has a Buy call with a S$7.60 target. (frankie.ho@dowjones.com)

BT: Morgan's China-play picks include Wilmar

Business Times - 11 Nov 2010

Morgan's China-play picks include Wilmar

By LYNETTE KHOO

INVESTORS hoping to get a slice of the China action should do so through multinational companies (MNCs) in the consumer, water treatment, energy resources and electronics space. These would include companies such as Apple, Pfizer, Suez, Infineon, Wilmar International and Samsung Electronics.

Morgan Stanley Hong Kong and China strategist Jerry Lou noted that these companies have long track records and offer transparency and consistent disclosure standards. They are also less vulnerable to policy and asset price cycles in China.

'If China's economy comes to represent 14 per cent of global GDP by 2020, MNCs need to think about how they can benefit strategically from China's advancement,' said Mr Lou in his presentation at the Morgan Stanley's 9th Annual Asia Pacific Summit 2010.

His top picks include Singapore-listed Wilmar International, which controls 25 per cent of the Chinese oilseed crushing market and 40 per cent of the branded cooking oil market, and which he believes will achieve mid-teens average earnings per share growth from 2011 to 2015.

Mr Lou also favours Apple, which will benefit from its brand recognition and major consumer upgrade; and Samsung Electronics, which is poised to tap China's growing LCD TV market.

He noted that consumption is becoming a compelling story in China, with the country expected to replace Japan as the largest luxury consumer market in the next few years.

'Companies that can make things cheap will not necessarily be the ultimate winners. The ultimate winners will be those that can offer a first-class consumer experience,' Mr Lou said. 'Do not underestimate Chinese consumers' appetite to upgrade, especially when the baby boomers become the mainstream consumers.'

Also among his top picks were Pfizer, the largest foreign pharmaceutical firm in China; Suez, the second largest drinking water private operator in China; and chipmaker Infineon, which is expected to benefit from car consumption and industrial capacity upgrade in China.

Qing Wang, Greater China chief economist at Morgan Stanley, noted that China's consumption growth is expected to outpace investment growth over the next 10 years.

According to him, China is at a similar stage of development as Japan 40 years ago and South Korea some 20 years ago. Mirroring the past trend of the two economies, China has seen growth deceleration and rising inflation since its inflexion point in 2007.

Morgan Stanley expects consumer price index growth to peak at 3.7-3.8 per cent year-on-year for the October to November period before falling below 3.5 per cent in December, with GDP estimated at 10.2 per cent for 2010 and to ease to 9.5 per cent in 2011.

In a bid to mop up excess liquidity following the US's second round of quantitative easing this month, China's central bank yesterday said that it was raising the required reserve ratio of its top lenders by 50 basis points from Nov 16, its fourth official increase this year. This followed an interest rate hike last month, which lifted the one-year deposit rate and one-year lending rate by 25 basis points to 2.5 per cent and 5.56 per cent respectively.

Dr Wang, however, does not expect China to embark on an interest rate hike cycle, saying that it is more likely to rely on tightening bank's reserve requirement ratios.

Given its capital and credit controls, Mr Lou said, China is unlikely to face a systemic risk arising from any sudden pull-back in liquidity.

BT: Wilmar Q3 net profit plunges 60.3%

Published November 11, 2010

Wilmar Q3 net profit plunges 60.3%

Loss in oilseeds and grains unit; absence of big one-time gain

By FELDA CHAY

WILMAR International's third-quarter net profit plunged 60.3 per cent year-on-year due to the weaker performance of its oilseeds and grains division and the absence of a big one-time gain.

Net profit for the period ended Sept 30 was US$259.5 million, or 4.1 US cents a share. In the corresponding period last year, Wilmar registered US$652.9 million in earnings, partly buoyed by a net exceptional gain of US$167 million from the sale of new shares by its Wilmar China unit.

The latest poor showing took a heavy toll on Wilmar's share price yesterday. It touched a low of S$6.48 before recovering slightly to close 37 Singapore cents lower at S$6.51, a fall of 5.4 per cent. Some 37.3 million shares changed hands.

Despite the lacklustre results, the world's biggest listed palm oil plantation firm remained upbeat about its prospects.

Chairman and chief executive Kuok Khoon Hong said: 'Despite the weak Q3 performance, the group remains positive on its long-term prospects.'

'The outlook for Asian economies, especially China, India and Indonesia, remains positive. The group will continue to leverage on its well-established presence in these markets and invest in existing and new businesses for growth.'

For Q3, Wilmar's oilseeds and grains division recorded a pre-tax loss of US$37.1 million, despite a 28 per cent rise in sales volume. The loss was attributed to 'weaker margins and less timely purchases of raw materials'.

Revenue for the period rose 23.3 per cent to US$7.8 billion.

For the nine-month period, Wilmar's earnings dropped 30.2 per cent to US$1 billion, or 15.7 US cents per share. Sales were 25.5 per cent higher at US$21.3 billion.

At Sept 30, the company had cash and cash equivalents of US$596.3 million, compared with US$1.2 billion a year earlier.