Wilmar delays China IPO, to invest in Africa

http://myinvestingnotes.blogspot.com/2009/11/wilmar-delays-china-ipo-to-invest-in.html

Wilmar delays China IPO, to invest in Africa
Published: 2009/11/13

SINGAPORE: Wilmar International, the world's largest listed palm oil firm, signalled a promising outlook for its earnings but said the US$3.5 billion (US$1 = RM3.38) listing of its China unit is on hold due to its concern over valuations.

The palm oil giant's listing plan was the recent trigger for a rally in its shares, which retreated yesterday despite a quarterly profit that beat expectations.

"We will shelve it for the time being and wait for market conditions to improve," Wilmar's chairman and CEO Kuok Khoon Hong said after a media and analysts' briefing for its third-quarter results.

"We only will list the China operation if it commands better price than what Wilmar is commanding right now in the stock market," he added.

Analysts have estimated that Wilmar's China unit could be valued as by much as 20 times earnings, matching the parent company's current price-to-earnings multiple.

With more than 30 firms eyeing listings in either Hong Kong or India over the next few months, leading to more than US$10 billion in share sales, companies wanting to list have had to keep their hopes for high prices in check.

Analysts have said Wilmar, which has a market value of US$30 billion, has no immediate need for funds.

The company said it was optimistic about prospects for the rest of this year after a one-off gain helped it post a better-than-expected 35 per cent rise in its third quarter profit.

Analysts were less impressed. "Excluding exceptional and one-off items, Wilmar's operating performance in its third quarter 2009 was not as strong as we would expect from normal seasonality," Goldman Sachs analyst Patrick Tiah said in a research note.

"Notwithstanding, given the market's low expectations we believe consensus earnings could rise following the results," he added.

Wilmar's Kuok said the company plans to invest at least US$1 billion in China, Indonesia and Africa to expand its plantations and plants.

The company has raised profits in the last few quarters thanks to its processing and refining capabilities, outperforming rival palm oil firms that depend primarily on plantations.

Wilmar's shares have more than doubled this year, but some analysts cut their ratings after the company delayed plans in late September to float its China unit due to volatile markets.

The listing would have raised around US$3.5 billion.

CEO Kuok said earlier in a statement that he was optimistic about the firm's prospects for the rest of the financial year given the diversity of its business segments.

Wilmar, derives about half of its total sales from China, and owns oil palm plantations and runs crushing and refining plants in Indonesia and Malaysia.

The company, the second-largest on the Singapore Exchange after Singapore Telecommunications, earned US$653 million in July-September, up from US $483 million a year ago. - Reuters