Phillip Securities keep buy advice on Wilmar International

The acquisition of a sugar refiner in Indonesia and the launch of its loan and credit facility were factors that pushed Phillip Securities Research Pte Ltd to maintain its buy recommendations on Wilmar International Limited’s (WIL) with a new target price of S$7.03.

In a statement, Phillip Securities said they are positive on the direction WIL is taking, as it intends to build a significant sugar business replicating after the success of its other agro-commodities like palm oil.

Phillip Securities further noted that leveraging on the experience of Sucrogen will help WIL to kick start its sugar expansion plans in high demand emerging markets like Indonesia, China and India, where they have already established a strong presence and sales network.

Phillip Securities said it revised lifted its average CPO for FY10E to US$825/tonne from US$800/tonne in view of weaker recovery of CPO production in 2H10 and rising prices of its rival soybean oil.

Phillip Securities said WIL recently signed a mandate letter with ANZ Bank and HSBC to launch loan and credit facility for the acquisition and working capital requirements of Sucrogen, and that also it acquired a sugar trading business and a leading sugar refiner in Indonesia.

WIL earlier acquired PT Jawamanis Rafinasi (JMR), which owns and operates one of the leading sugar refineries in Indonesia located in Banten and caters to the industrial sugar market, to form an integral part of its future Indonesian sugar business, providing downstream refining and distribution to complement its upstream sugar operations in Papua.

WIL also announced it had acquired Windsor & Brook Trading Pte Ltd (“W&B”), a sugar trading business, in line of its expansion plan into the sugar market and to help in making timely purchases of inputs and sales of products, which is critical in the commodity processing business.

“Factoring in the recent completed acquisitions of a 20% stake in Kencana Agri and 100% of Natural Oleochemicals Sdn Bhd together with the upward revision of our average CPO price for FY10E, we derived a new target price of S$7.03, using the DCF method. We continue to like WIL for its diversification and exposure to emerging countries. Overall we are positive on the Group’s business prospects and hence we are keeping our BUY recommendation for WIL,” Phillip Securities said.