With reference to Wilmar 1H FY08 earning announced on 14th Aug 08, following is a brief summary of it.
1. Revenue for 1H FY08 up 202% to US$14.971b as compared with 1H FY07 of US$4.964b.
2. Gross Profit for 1H FY08 up 311.9% to US$1.808b as compared with 1H FY07 of US$439m.
3. Net Profit for 1H FY08 up 346% to US$674.8m as compared with 1H FY07 of US$151.3m.
4. EPS for 1H FY08 up 81% to 10.31 US cents as compared with 1H FY07 of 5.70 US cents.
5. Cash flow for 1H FY08 is US$764.6m as compared with 1H FY07 of US$190.7m.
6. NAV for 1H FY08 is 132.07 US cents as compared with FY07 of 122.86 US cents.
Revenue was up 202% mainly due to higher CPO and oilseed prices and increased sales volume, driving the net profit to up 346% for 1H FY08. Presently, prices of commodities ( including crude oil and palm oil ) have been falling since early Jul 08, this results in palm oil prices likely to remain subdued. However, while the lower edible oil prices affect plantation earnings, the company's downstream businesses will benefit. Coupling with the company's business in China to be expected to perform well, Wilmar is optimistic that its performance for the rest of the year will be satisfactory.
Analysts' responses to the result are as followed.
1. UBS buy rating, target price $5.00
2. Nomura buy rating, target price $4.90
3. DBSV downgrades to hold from buy rating, unchanged target price $4.50
Assuming Wilmar's business for the rest of FY08 does not badly affected by the falling of commodity prices, a conservative estimation of FY08 EPS would be 20.62 US cents ( approx 28.868 S cents ). At 15th Aug 08 price of $3.99, this translates to 13.8x FY08 PE. Below is a list of valuation based on the conservative FY08 EPS of 28.868 S cents.
20x FY08 PE -- $5.77
18x FY08 PE -- $5.20
16x FY08 PE -- $4.62
14x FY08 PE -- $4.04
12x FY08 PE -- $3.46
10x FY08 PE -- $2.89
8x FY08 PE -- $2.31
6x FY08 PE -- $1.73
For investors who have interest in Wilmar for long term holding and catering for global commodity prices might falling further and to have a good margin of safety a price level of 10x FY08 PE or lower ( $2.89 or lower ) would be an attractive valuation. Technically, short-term support for Wilmar is around the $3.80 level whereas short-term upside is capped at the $4.40 ( 200d EMA level ).
