Why Wilmar can shrug off lower plantation profits

Lower soybean prices a likely upside for the agri player.

As crude palm oil prices started their downtrend in the past week, agri players are expected to suffer from lower plantation profits. For Wilmar, however, this could be more than offset by two things.

According to RHB, Wilmar's better processing margins due to lower feedstock costs would give it a boost amidst lower plantation yields. More so, RHB cites moderating soybean prices as a possible upside for Wilmar.

"A declining trend in soybean prices is generally positive for Wilmar. With the current bumper crop in Brazil, we believe positive crushing margins can be achieved at Wilmar," said the brokerage research firm.

Meanwhile, RHB noted how well Wilmar's investments in joint ventures and associates performed in the past year, delivering a 35% year-on-year growth in contributions.

"The group expects to benefit from the lifting of restrictions on foreign investments in China’s oilseeds and grains processing businesses. Given that its adjusted net gearing ratio has come off to 0.35x, we believe the group could gear up to take on more M&As," explained RHB.