Wednesday, September 23, 2015

Wilmar kept at 'buy' by OCBC with lower target price to $3.17

Shares of Wilmar International, no thanks to its lower-than-expected 2QFY15 results, have dropped by a fifth over the past month.

“Besides the results, we suspect that the growing uncertainty of China’s economic growth and the recent devaluation of the CNY have also been weighing on the stock; this is not surprising since Wilmar derives a significant part of its revenue from China,” states OCBC in a Sept 23 report.

However, from the perspective of OCBC, the concerns over China’s slowing economy seem “overdone”, which is keeping its “buy” call on the stock.

It notes that most economists have kept their GDP growth forecast for this year 2015, based on expectations that that the central government would announce more pump priming measures to sustain economic growth at 7% for 2015.

Some economists are expecting China to grow 6.5% in each of the company two years, but the slower growth is in line with China’s shift from an industrial-driven economy to a services-driven one.

Wilmar’s management, according to OCBC, has remained “cautiously optimistic” that 2H2015 will be “satisfactory”, with crush margins to remain positive for rest of the year, and consumer products to remain high in demand.

Nevertheless, in order to account for the “lower risk appetite” of investors in the current market conditions, OCBC has revised its valuation peg for Wilmar from 12 times blended FY15/16 earnings per share, from 13 times. This cuts OCBC’s target price on the stock from $3.43 to $3.17.

As at 10.23am, Wilmar shares were down 5 cents to $2.66.

Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg

0 comments:

Post a Comment