China business a boon for Wilmar International

It has 45% market share in consumer pack edible oils.

Set for its China initial public offering (IPO) listing in Q4, Wilmar could bank on its China segment to trade at a higher valuation against its peers, thanks to its strong market positioning in the oilseeds & grains processing segment which accounted for 60% of the group’s profit after tax (PAT), according to a report by UOB Kay Hian analyst Leow Huey Chuen.

The analyst noted that its ARAWANA brand is one of the well-known premium household brandsin China, not only for cooking oil but also for consumer pack rice, flour and dry noodles. “Wilmar is the top producer of consumer pack edible oils in China with about a 45% market share. Associate company, Luhua (33% stakes), is also the top peanut oil producer in China,” Leow added.

With a 10% listing, the report said that proceeds from the IPO are expected to be at around $1.62b (US$1.2b) to $1.76b (US$1.3b) and the bulk of the proceeds will be utilised for expansion in China, which is in line with management’s 2019 capex guidance of $1.620-$1.76b (US$1.5b-1.6b.).

“Much of the capex has been allocated for expansion of soybean crushing, wheat flour and rice milling capacities in China. Higher allocations could go towards to rice and flour, which are just starting to see consumer purchases slowly migrating to premium brand,” the analyst explained.

The report also noted that Wilmar’s subsidiary, Yihai Kerry, launched a $590m (RMB3b) investment project in Guangzhou, China involving a processing complex which consists of a soybean crushing mill, consumer pack edible oil plant, specialty fats plant, rice project, chocolate project, central kitchen project, cold chain logistics project, plastic packaging materials project, consumer experience museums and other projects.