Will Wilmar cross S$5 a share soon?
Wilmar International shares fell 4.8% at the start of the week, despite the group posting significantly higher profits for H1 2020.
Wilmar share price: What’s the latest?
Shares of Singapore crude palm oil producer Wilmar International (SGX: F34) are on the rebound, despite price dropping 4.8% at the start of the week amid higher first half net profit.
As at 16:15 SGT on Friday 14 August 2020, Wilmar shares are trading at S$4.82 each on the IG platform – up slightly from the week’s opening price of S$4.79.
IG’s market analysis shows that ‘buys’ currently form 60% of all trades on the Wilmar counter, and 54% of all trades across the week so far.
Additionally, 63% of client accounts also hold ‘buy’ (long) positions on the stock, indicating a wider expectation for Wilmar’s share price to rise in the immediate term.
Wilmar raises H1 dividends by 33% to S$0.04 a share
On Tuesday 11 August 2020, the agriculture business group reported a 50% improvement in net profit to US$610.9 million (S$829 million) for the six months ended 30 June 2020, up from H1 2019’s US$407.9 million (S$560 million), on the back of improved contributions across all core segments.
On a quarterly basis, net profit for Q2 2020 came in 156% higher year-on-year at US$386.6 million (S$531 million). It also exceeded Refinitiv analyst estimates of US$163 million (S$224 million).
Excluding losses from non-operating items, core net profit for H1 2020 improved 49% year-on-year to US$635.9 million (S$873 million)
Group revenue increased 12% to US$22.66 billion (SS$31 billion) in the first half, versus the US$20.23 billion (S$27.8 billion) recorded in the same period a year ago, driven by improved demand across all core segments.
Breaking down by segment, Consumer Products sales increased significantly at 29% year-on-year, thanks to the Covid-19 pandemic which the group stated resulted in more people staying indoors and buying home food products.
This, alongside the consolidation of Wilmar’s Australian subsidiary Goodman Fielders’ results in the current period, contributed to the higher revenue recognised in H1 2020.
The group’s board of directors has proposed an interim tax exempt (one-tier) dividend for H1 2020 of S$0.04 per share, 33% higher than 2019’s first half dividend amount of S$0.03.
The proposed dividend will be payable on 27 August 2020.
Wilmar ‘cautiously optimistic’ about second half of 2020
Looking ahead, the group says it expects the Food Products and Feed and Industrial Products segments, which performed well in H1 2020 thanks to a strong Q2, to continue to perform well for the rest of the year.
‘The recent increase in palm prices will also contribute favourably to our plantations business. We are cautiously optimistic that our second half performance will be satisfactory,’ said Mr. Kuok Khoon Hong, Chairman and CEO of Wilmar.
In shareholder updates, the group stated that its Chinese subsidiary, Yihai Kerry Arawana Holdings Co., Ltd, has obtained listing clearance from the Shenzhen Stock Exchange(SZSE) ChiNext Board Listing Committee.
The company has also submitted the updated prospectus to the China Securities Regulatory Commission (CSRC) for final registration approval for listing on SZSE ChiNext Board.
‘We would like to emphasize that although listing clearance from the committee has been obtained, there is no certainty or assurance as at the date of this announcement that the listing proposal will be carried out as it is still subject to CSRC approval and market conditions. Shareholders are advised to exercise caution in trading their shares in the company,’ Mr. Kuok added.
Analysts give Wilmar a share price target of S$5.04
As of 13 August 2020, the stock has received a 12-month consensus share price target of S$5.04 per share from six analysts, alongside an average rating of ‘buy’ – based on a Refinitiv poll of 15 brokers.
The most optimistic of all is CIMB, which gave Wilmar a price target of S$5.53 a share, citing the group’s ‘stellar’ H1 performance and plans to list Yihai Kerry Arawana (YKA).
‘At its current price, we estimate the implied price-to-earnings for YKA is 22x which is below some of its peers. As such, we believe there is scope for a re-rating if pricing for the initial public offering turns out better than our current expectation,’ the analysts wrote on 11 August.
Meanwhile, DBS analyst Simadiputra – the most conservative of the lot, gave the stock a 12-month price target of S$4.60 on a ‘buy’ call.
His higher price target is predicated on the notion that exports are starting to recover, which has allowed June 2020’s crude palm oil output to increase 24% year-on-year and 14% over May 2020 to 1.89 million metric tonnes.
Other positive factors cited by Simadiputra include the stabilisation of crude palm oil prices at around 2,400 Malaysian ringgit to 2,450 ringgit – up May 2020 lows of 2,210 ringgit.
Nevertheless, downsides are still present in the form of weaker demand caused by a resurgent Covid-19 pandemic. As such, he noted that the market is still awaiting better inventory and output data for the month of August 2020 and the second half of the year.
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