Wilmar (SGX:F34) – Don’t Ignore This Commodity Super Cycle Beneficiary

Palm oil plantation companies has been the talk of the town since past few weeks. Palm oil’s spot price moved up from its multi-year low price level of $576 per mt (in May 2020) to the current level of $1031 per mt (almost 80% return). This is the highest price level for the Palm oil in past 10 years.

Historical Performance of the Stock

Amongst its competitors, Wilmar International Limited (SGX:F34) is the only company which has given a consistent return since past 5 years on total return basis (which accounts for dividend payment as well). The 5-year return of Wilmar was 43.7%. On the other hand, 5-year return of its competitors – First Resources was 1.7% and Bumitama Agri was -25.8%.

Revenue Trends

Below is 5-year historical revenue of Wilmar International Limited in US$ million. It has registered 4.1% revenue growth on CAGR basis over 5-year period.   

Net Profit Trends

Below is 5-year historical net profit in US$ million. It has registered 9.55% net profit growth on CAGR basis over 5-year period.  

Revenue & Earnings Breakdown

It derives the highest revenue (almost 55%) from “Feed & Industrial Products” segment. This segment caters to Processing, merchandising and distribution of products, which include animal feeds, non-edible palm and lauric products, agricultural commodities, oleochemicals, gas oil and biodiesel.

“Food Products” segment is 2nd highest revenue contributor (almost 45%) for the firm. This segment caters to Processing, branding and distribution of a wide range of edible food products, which include vegetable oil produced from palm and oilseeds, sugar, flour, rice, noodles, specialty fats, snacks, bakery and dairy products.

Both these segments together contribute almost 95% of total revenue of the firm.

It derives the highest profit from “Food Products” segment. Though, revenue wise, this segment is 2nd highest contributor, almost 30%. This means that profit margin of this segment of business is the highest. “Feed & Industrial Products” segment is 2nd highest Profit contributor.

Both these segments together contribute almost 80% of total profit of the firm.

Return on Equity

Return on Equity (RoE) is one of the concerns for this firm. The 5-Year Average RoE is 7.62, which is too low. But there is a scope for the expansion of RoE for the firm. The trend of RoE is almost upward i.e. it has been increasing every year (except in FY17) since past 5 years.

Dividend Per Share

Average Payout ratio of the firm is close to 40% of its earnings. Per share Dividend has constantly increased on YoY basis over past 5-year period.

Dividend yield is between 2.5-3% over past 6-year period.

Short to Medium term trigger

Below are some of the short to medium term trigger for its stock price –

  1. Commodity Super cycle has sent the Palm oil price to its highest price level in the past 10 years.
  2. China’s faster recovery from COVID19 is positive for the firm.
  3. One of the subsidiary Adani Wilmar limited is planning for an IPO in Indian market.

Disclaimer

Our content is for informational purpose only. We don’t recommend the stocks by such analysis. You must do your own research before undertaking any investment making decision.

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Published by Amit

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