Wilmar International

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#1
Was Wilmar overly hyped in the first place? Not vested.

Nov 11, 2010
Wilmar drops $2.36b in market value

Staggering fall comes after surprise 60.3% plunge in Q3 profits
By Goh Eng Yeow, Senior Correspondent

PLANTATIONS giant Wilmar International had a staggering $2.36 billion shaved off its market value yesterday following an unexpected 60.3 per cent drop in third-quarter profit.

The profit shrinkage to US$259.48 million (S$333.95 million) - which came despite a 23.3 per cent jump in revenues to US$7.76 billion - sent analysts scrambling to rush out reports expressing disappointment after their earlier glowing comments on its prospects proved illusory.

And traders lost no time in selling off the stock, which had climbed 15 per cent in the past six weeks. This knocked Wilmar's share price down 37 cents to $6.51 - a 5.5 per cent fall - on a heavy volume of 37.34 million shares.

Putting a positive spin on the company's latest financials, Wilmar's chairman and chief executive Kuok Khoon Hong said that 'despite the weak third-quarter performance, the group remains positive on its long-term prospects'.

The company will continue to leverage on its well-established presence in markets like China, India and Indonesia, and invest in existing and new businesses.

Among analysts, though, the big question is whether Wilmar's weak third-quarter performance is a one-off, or flags a potentially more serious problem. The consensus is that the firm's full-year earnings estimates may drop by about 10 per cent, as a result of the weaker quarter.

A US$37.1 million quarterly loss in its oilseeds and grain division, from a profit of US$193.1 million last time, is seen as the chief reason for Wilmar's profit slide.

Also hurting performance were weaker margins in most business segments and the fact that the company had benefited from an exceptional gain from the sale of new shares in Wilmar China in the third quarter of last year.

According to a report from Morgan Stanley analyst Conrad Werner, this division in Wilmar buys soya beans and crushes them into end-products such as soya bean meals and oil products for sale.

Because of the huge quantities of soya bean involved, the timing of the raw materials purchase is critical.

'Wilmar also hedges its exposure, sometimes taking opportunistic positions. This quarter, the timing of the purchases clearly did not work in the company's favour,' said Mr Werner.

'Assuming Wilmar can get back on track in the fourth quarter and hit the consensus estimate in that quarter, then consensus EPS (earnings per share) would come down by only 10 per cent in 2010. 2011 could be impacted by less,' he said.

One concern among investors, he noted, was the lack of earnings visibility in the purchasing element of Wilmar's business model. This worry has come to the fore, following the loss recorded in the oilseeds and grain division.

For the quarter, Wilmar's earnings per share fell 59.8 per cent to 4.1 US cents, while net tangible asset per share rose to US$1.18 from US$1.08.

engyeow@sph.com.sg


My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#1
Was Wilmar overly hyped in the first place? Not vested.

Nov 11, 2010
Wilmar drops $2.36b in market value

Staggering fall comes after surprise 60.3% plunge in Q3 profits
By Goh Eng Yeow, Senior Correspondent

PLANTATIONS giant Wilmar International had a staggering $2.36 billion shaved off its market value yesterday following an unexpected 60.3 per cent drop in third-quarter profit.

The profit shrinkage to US$259.48 million (S$333.95 million) - which came despite a 23.3 per cent jump in revenues to US$7.76 billion - sent analysts scrambling to rush out reports expressing disappointment after their earlier glowing comments on its prospects proved illusory.

And traders lost no time in selling off the stock, which had climbed 15 per cent in the past six weeks. This knocked Wilmar's share price down 37 cents to $6.51 - a 5.5 per cent fall - on a heavy volume of 37.34 million shares.

Putting a positive spin on the company's latest financials, Wilmar's chairman and chief executive Kuok Khoon Hong said that 'despite the weak third-quarter performance, the group remains positive on its long-term prospects'.

The company will continue to leverage on its well-established presence in markets like China, India and Indonesia, and invest in existing and new businesses.

Among analysts, though, the big question is whether Wilmar's weak third-quarter performance is a one-off, or flags a potentially more serious problem. The consensus is that the firm's full-year earnings estimates may drop by about 10 per cent, as a result of the weaker quarter.

A US$37.1 million quarterly loss in its oilseeds and grain division, from a profit of US$193.1 million last time, is seen as the chief reason for Wilmar's profit slide.

Also hurting performance were weaker margins in most business segments and the fact that the company had benefited from an exceptional gain from the sale of new shares in Wilmar China in the third quarter of last year.

According to a report from Morgan Stanley analyst Conrad Werner, this division in Wilmar buys soya beans and crushes them into end-products such as soya bean meals and oil products for sale.

Because of the huge quantities of soya bean involved, the timing of the raw materials purchase is critical.

'Wilmar also hedges its exposure, sometimes taking opportunistic positions. This quarter, the timing of the purchases clearly did not work in the company's favour,' said Mr Werner.

'Assuming Wilmar can get back on track in the fourth quarter and hit the consensus estimate in that quarter, then consensus EPS (earnings per share) would come down by only 10 per cent in 2010. 2011 could be impacted by less,' he said.

One concern among investors, he noted, was the lack of earnings visibility in the purchasing element of Wilmar's business model. This worry has come to the fore, following the loss recorded in the oilseeds and grain division.

For the quarter, Wilmar's earnings per share fell 59.8 per cent to 4.1 US cents, while net tangible asset per share rose to US$1.18 from US$1.08.

engyeow@sph.com.sg


My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
i am not well versed in this area seriously so couldnt comment.
Dividend Investing and More @ InvestmentMoats.com
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#2
i am not well versed in this area seriously so couldnt comment.
Dividend Investing and More @ InvestmentMoats.com
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#3
Wilmar has around 6.4 billion shares each currently priced at $6.32. This gives a market capitalization of S$40.4 billion. Hence a decline of $2.3 billion isn't as scary as the headlines might portray it to be.

(Not vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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#3
Wilmar has around 6.4 billion shares each currently priced at $6.32. This gives a market capitalization of S$40.4 billion. Hence a decline of $2.3 billion isn't as scary as the headlines might portray it to be.

(Not vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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#4
Wilmar is the second largest company listed in SGX (in terms of market capitalization). It is the world largest palm oil processor with an extensive distribution network in Asia. It recently expanded into sugar with a flurry of acquisitions.

Today, it announced its first foray in the Chinese property market by forming a JV company with Shangri La and Kerry Properties. It invested US$36 million in this JV company. Seems like Wilmar intends to become a conglomerate with a commodity and property business divisions - wonder how will it pans out...very interesting development.

http://info.sgx.com/webcoranncatth.nsf/V...penelement

(Not Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
Reply
#4
Wilmar is the second largest company listed in SGX (in terms of market capitalization). It is the world largest palm oil processor with an extensive distribution network in Asia. It recently expanded into sugar with a flurry of acquisitions.

Today, it announced its first foray in the Chinese property market by forming a JV company with Shangri La and Kerry Properties. It invested US$36 million in this JV company. Seems like Wilmar intends to become a conglomerate with a commodity and property business divisions - wonder how will it pans out...very interesting development.

http://info.sgx.com/webcoranncatth.nsf/V...penelement

(Not Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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#5
still in the "family" biz with both Kerry and SA being the older Kuok's vehicles.
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#5
still in the "family" biz with both Kerry and SA being the older Kuok's vehicles.
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#6
I don't understand this at all.
Wilmar should stick to commodities, Shangri la to hotels and Kerry to properties and retail.
Wilmar should focus on being the next commodity giant like Cargill.
They should not get distracted by the China property market.

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#6
I don't understand this at all.
Wilmar should stick to commodities, Shangri la to hotels and Kerry to properties and retail.
Wilmar should focus on being the next commodity giant like Cargill.
They should not get distracted by the China property market.

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#7
(22-12-2010, 10:33 AM)Risk Adverse Wrote: I don't understand this at all.
Wilmar should stick to commodities, Shangri la to hotels and Kerry to properties and retail.
Wilmar should focus on being the next commodity giant like Cargill.
They should not get distracted by the China property market.

A possible case of "diworsification"? Tongue
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#7
(22-12-2010, 10:33 AM)Risk Adverse Wrote: I don't understand this at all.
Wilmar should stick to commodities, Shangri la to hotels and Kerry to properties and retail.
Wilmar should focus on being the next commodity giant like Cargill.
They should not get distracted by the China property market.

A possible case of "diworsification"? Tongue
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#8
(22-12-2010, 11:12 AM)Musicwhiz Wrote:
(22-12-2010, 10:33 AM)Risk Adverse Wrote: I don't understand this at all.
Wilmar should stick to commodities, Shangri la to hotels and Kerry to properties and retail.
Wilmar should focus on being the next commodity giant like Cargill.
They should not get distracted by the China property market.

A possible case of "diworsification"? Tongue

I think the Market concurs with you since the share price has dropped by over 4%.

While the investment of US$36 million is small (as compared to its asset size), it should have explained why they have ventured into the property division and what are their future plans for it. Do they intend to grow a multi-billion property business division or was this a purely opportunistic acquisition ? Personally, I think their shareholders should be given a proper update.

(Not Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
Reply
#8
(22-12-2010, 11:12 AM)Musicwhiz Wrote:
(22-12-2010, 10:33 AM)Risk Adverse Wrote: I don't understand this at all.
Wilmar should stick to commodities, Shangri la to hotels and Kerry to properties and retail.
Wilmar should focus on being the next commodity giant like Cargill.
They should not get distracted by the China property market.

A possible case of "diworsification"? Tongue

I think the Market concurs with you since the share price has dropped by over 4%.

While the investment of US$36 million is small (as compared to its asset size), it should have explained why they have ventured into the property division and what are their future plans for it. Do they intend to grow a multi-billion property business division or was this a purely opportunistic acquisition ? Personally, I think their shareholders should be given a proper update.

(Not Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
Reply
#9
There were some signs of troubling with Wilmar, the first was after the latest result announcement due to the profit margin contraction, now with this property news and the family link in the joint venture, the good thing is the did not going into China Commercial and Residential.

This would be a good excuse for me to dispose Wilmar shares if i own some , the valuation is high and if you wait longer, the earning revision is on the downside. I think Peter Lee probably already disposed quite a large portion to fund for his Thomson Medical buyout

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#9
There were some signs of troubling with Wilmar, the first was after the latest result announcement due to the profit margin contraction, now with this property news and the family link in the joint venture, the good thing is the did not going into China Commercial and Residential.

This would be a good excuse for me to dispose Wilmar shares if i own some , the valuation is high and if you wait longer, the earning revision is on the downside. I think Peter Lee probably already disposed quite a large portion to fund for his Thomson Medical buyout

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#10
(22-12-2010, 05:02 PM)SLC81 Wrote: There were some signs of troubling with Wilmar, the first was after the latest result announcement due to the profit margin contraction, now with this property news and the family link in the joint venture, the good thing is the did not going into China Commercial and Residential.

This would be a good excuse for me to dispose Wilmar shares if i own some , the valuation is high and if you wait longer, the earning revision is on the downside. I think Peter Lee probably already disposed quite a large portion to fund for his Thomson Medical buyout

Very good point. A company troubles rarely start at a sudden. Usually, there is a series of poor news that precedes it ie poor earnings and unsuccessful acquisitions. Prospective shareholders should study the corporate actions of any interesting Company over the past few quarters to get a feel of their direction...TA within FA haha ! To some extent, I would point to Wilmar's failure to list its Chinese operations last year as the start of its trouble. I guess the market there did not agree to Wilmar's valuation and with good reason judging by the recent poor results. On hindsight, this was a pretty good warning sign.

(Not Vested)
Disclosure: This represents my own point of view which may be very flawed.

DMG Research (http://www.remisiers.org/cms_images/rese..._Noble.pdf)

Scoop of the Day: We are negative on Wilmar’s entry into the property
market. While the investment amount of US$134m is small relative to the size
of Wilmar’s balance sheet and we have no doubt about the eventual
profitability of the project given the knowledge of Kerry Properties and Shangrila’s
knowledge in the property market, the entry into the property market
represents Wilmar’s first ever deviation from its core agribusiness. In the past
several years, all of Wilmar’s expansions have been in related businesses
such as sugar, rice and flour which leverage on its vast distribution network.
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. We are maintaining our Buy call however as we view Wilmar as being
inexpensive at 13.5x CY11 earnings. (Singapore Research)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
Reply
#10
(22-12-2010, 05:02 PM)SLC81 Wrote: There were some signs of troubling with Wilmar, the first was after the latest result announcement due to the profit margin contraction, now with this property news and the family link in the joint venture, the good thing is the did not going into China Commercial and Residential.

This would be a good excuse for me to dispose Wilmar shares if i own some , the valuation is high and if you wait longer, the earning revision is on the downside. I think Peter Lee probably already disposed quite a large portion to fund for his Thomson Medical buyout

Very good point. A company troubles rarely start at a sudden. Usually, there is a series of poor news that precedes it ie poor earnings and unsuccessful acquisitions. Prospective shareholders should study the corporate actions of any interesting Company over the past few quarters to get a feel of their direction...TA within FA haha ! To some extent, I would point to Wilmar's failure to list its Chinese operations last year as the start of its trouble. I guess the market there did not agree to Wilmar's valuation and with good reason judging by the recent poor results. On hindsight, this was a pretty good warning sign.

(Not Vested)
Disclosure: This represents my own point of view which may be very flawed.

DMG Research (http://www.remisiers.org/cms_images/rese..._Noble.pdf)

Scoop of the Day: We are negative on Wilmar’s entry into the property
market. While the investment amount of US$134m is small relative to the size
of Wilmar’s balance sheet and we have no doubt about the eventual
profitability of the project given the knowledge of Kerry Properties and Shangrila’s
knowledge in the property market, the entry into the property market
represents Wilmar’s first ever deviation from its core agribusiness. In the past
several years, all of Wilmar’s expansions have been in related businesses
such as sugar, rice and flour which leverage on its vast distribution network.
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. We are maintaining our Buy call however as we view Wilmar as being
inexpensive at 13.5x CY11 earnings. (Singapore Research)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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