3 reasons why Wilmar remains an appealing investment buy

Despite posting disappointing 1H13 results.

First, Wilmar International's share price hit after reporting the weaker-than-expected first-half performance has actually made it a decent entry level for investors, with a potential 10% upside waiting in the wings for those who decide to plunge in.

"We would be buyers at S$3.10 or better, as we believe that most of the risks would have been captured in the price," said OCBC's Carey Wong.

"Keeping our fair value at S$3.33 (still based on 12.5x blended FY13/FY14F EPS), we note that there is now a decent 10% upside from here," Wong added.

Second, Wilmar is facing a stronger second half, at least according to annual patterns.

"WIL tends to perform better in the second half. One reason is the seasonality of its sugar business in Australia. That outfit will typically reverse from a lossmaking position to a highly profitable one. And with the sugar prices
already on the rebound, we believe that 2H13 would be no exception (although there may still be lingering concerns over a mystery cane disease – Yellow Canopy Syndrome – that causes canes to turn yellow)," said Wong.

Third, Wilmar is somewhat shielded from slowing China growth.

"Meanwhile, China – WIL’s largest market – appears to be opting for slower growth this year to allow the government to solve fundamental problems hindering long-run development, according to President Xi Jinping. However, we note that market still expects China to expand by 7.5% this year, which should not pose any issues for WIL’s consumer pack business. Management had previously said that retail packs are fairly resilient and may even benefit from more
people choosing to cook at home rather than dining out," reckoned Wong.