Wilmar International: A Strategic Move in Agribusiness

Recommendation: Add

Wilmar International (WIL) has taken a significant step by entering into an agreement to acquire up to a 31.06% stake in Adani Wilmar Limited (AWLTD). This acquisition will increase WIL’s ownership in AWLTD to 75%, transitioning it from an associate to a subsidiary. The transaction, expected to be completed by FY26, comes at a maximum price of Rs305/share, amounting to a total consideration of approximately Rs12,314 Crore (c.US\$1.4 billion).

Despite stretched valuations, the acquisition aligns with AWLTD’s strong profitability recovery, as evidenced by its 33% year-on-year revenue growth for 3QFY25. Furthermore, WIL’s plan to onboard additional strategic investors could unlock additional value for shareholders beyond FY26.

However, the closing of this deal is contingent on Adani Commodities LLP (ACL) completing a 12.87% stake sale to achieve the minimum public shareholding of 25%, as mandated by the Securities and Exchange Board of India (SEBI). While this eliminates the possibility of a special dividend in FY24, WIL’s final dividend is projected to remain flat at 11 Scts/share.

Wilmar’s target price remains unchanged at S\$3.47, pegged at 11x FY26F P/E. While profitability is expected to recover gradually, the company’s implied yield of 5.6% for FY24F, backed by a total dividend of 17 Scts/share, remains attractive for investors.

Key Catalysts and Risks

• Re-rating Catalysts: Improved consumer sentiment in China, lower finance costs in FY25, and emergence of strategic investors for AWLTD.
• Risks: Potential reduction in dividends for 2H24F and increased operating costs resulting from potential tariffs due to trade tensions between China and the incoming US administration.

Golden Agri-Resources Ltd

Recommendation: Not Rated

Golden Agri-Resources Ltd (GGR) posted a market cap of US\$2.27 billion with a forward P/E ratio of 6.5x for CY24F and 6.1x for CY25F. Despite a modest 0.8% earnings growth, the company maintains robust dividend yields of 13.1% and 12.2% for CY24F and CY25F, respectively. Its net gearing remains high at 51% for CY24F and 48.1% for CY25F, reflecting a strong balance sheet.

Key Financials

• EV/EBITDA: 3.7x for both CY24F and CY25F
• Dividend Yield: 2.0% for CY24F and 4.0% for CY25F

First Resources Ltd

Recommendation: Not Rated

First Resources Ltd (FR) exhibits a market cap of US\$1.63 billion. Despite a projected P/E ratio of 7.8x for CY24F and 8.0x for CY25F, the company is expected to achieve a 5.8% earnings CAGR over three years. The company demonstrates a strong financial position with net cash status and dividend yields of 13.7% and 12.6% for CY24F and CY25F, respectively.

Key Financial Metrics

• EV/EBITDA: 5.1x for both CY24F and CY25F
• Dividend Yield: 6.0% for CY24F and 6.5% for CY25F

Bunge Global SA

Recommendation: Not Rated

Bunge Global SA (BG) holds a market cap of US\$10.86 billion, with forward P/E ratios of 10.9x for CY24F and 10.4x for CY25F. Despite an 11.2% decline in earnings CAGR over three years, the company boasts a robust dividend yield of 11.4% for both CY24F and CY25F. Its net gearing stands at 28.1% and 29.9% for CY24F and CY25F, respectively.

Key Metrics

• EV/EBITDA: 6.8x for CY24F and 6.9x for CY25F
• Dividend Yield: 2.6% for both years

Archer-Daniels-Midland Co

Recommendation: Not Rated

Archer-Daniels-Midland Co (ADM) reports a market cap of US\$23.65 billion, with forward P/E ratios of 10.8x for CY24F and 10.6x for CY25F. The company anticipates a modest 3.6% decline in earnings CAGR over three years but maintains solid dividend yields of 11.2% and 10.9% for CY24F and CY25F, respectively.

Key Highlights

• EV/EBITDA: 7.5x for CY24F and 7.6x for CY25F
• Dividend Yield: 3.3% for CY24F and 3.5% for CY25F

IOI Corp Bhd

Recommendation: Reduce

IOI Corp Bhd is projected to deliver forward P/E ratios of 19.6x for CY24F and 17.4x for CY25F, with a three-year earnings CAGR of 5.3%. The company reports a market cap of US\$5.34 billion and offers dividend yields of 10.3% for CY24F and 11.0% for CY25F. However, its EV/EBITDA is relatively high at 12.6x and 10.8x for CY24F and CY25F, respectively, indicating potential overvaluation.

Genting Plantations Bhd

Recommendation: Hold

Genting Plantations Bhd holds a market cap of US\$1.17 billion and is projected to deliver forward P/E ratios of 17.5x for CY24F and 17.8x for CY25F. The company anticipates a three-year earnings CAGR of 10.1% and dividend yields of 5.5% for both years. However, its EV/EBITDA is relatively high at 8.4x and 8.2x for CY24F and CY25F, respectively.

Kuala Lumpur Kepong Bhd

Recommendation: Hold

Kuala Lumpur Kepong Bhd boasts a market cap of US\$5.23 billion and is expected to deliver forward P/E ratios of 19.9x for CY24F and 17.2x for CY25F. With a three-year earnings CAGR of 13.4%, the company offers dividend yields of 7.8% and 9.0% for CY24F and CY25F, respectively. Its EV/EBITDA stands at 9.8x and 9.6x for CY24F and CY25F, respectively.

Sime Darby Plantation Bhd

Recommendation: Add

Sime Darby Plantation Bhd (SDG) has a market cap of US\$7.6 billion and is expected to deliver robust forward P/E ratios of 24.1x for CY24F and 22.3x for CY25F. The company anticipates a strong three-year earnings CAGR of 22.1% and offers dividend yields of 7.0% and 7.6% for CY24F and CY25F, respectively. Its EV/EBITDA is relatively high at 10.3x and 10.0x for CY24F and CY25F, respectively.