Brokers’ take

WILMAR INTERNATIONAL
| BUY (MAINTAINED)
MAY 16 CLOSE: $3.55
TARGET PRICE: $3.94

RHB Research Institute, May 16

Following a briefing for analysts, we are more upbeat on second quarter results.

According to management, soybean crush turns positive this quarter, as utilisation rate increased from the first quarter.

This is largely due to consolidation in the crushing industry following the outbreak of African swine fever and improving demand due to cheap soybean meal prices.

On top of that, the group is likely to benefit from lower input costs on lower Brazilian soybean prices.

We believe the tropical oils should remain strong on low feedstock costs, while oilseeds and grains should improve, as soybean crush margins turn positive in the current quarter.

The initial public offering (IPO) of Wilmar's China subsidiary remains a key catalyst to share price. The group is likely to submit its prospectus to the China Securities Regulatory Commission in July.

Following which, management believes the authorities would take two to four months to approve. Management expects the IPO to be completed in the second half of 2019.

---

CITY DEVELOPMENTS LIMITED (CDL)
| BUY (MAINTAINED)
MAY 16 CLOSE: $8.63
TARGET PRICE: $12.00

Jefferies Singapore, May 15

CDL reported a first quarter net income of $199.6 million, up 134 per cent year-on-year (y-o-y) with growth driven by divestment gains.

Earnings before interest, tax, depreciation and amortisation (EBITDA) grew 48 per cent. But excluding the divestment gains, EBITDA was down 12 per cent y-o-y.

CDL announced an investment in China to acquire 24 per cent stake in a developer and a commercial property. The group continues to deliver steady sales in local projects with pre-tax margins hovering between 30 and 35 per cent.

But the hotel segment continues to underperform and commercial rentals were flat quarter-on-quarter despite UK acquisitions. We are neutral to cautious on the deal.

The massive land bank and long-term potential of China are key positives.

However, concerns revolve around execution and read of the policy cycle (especially in a period of trade and currency uncertainty), granularity of disclosures and how capital will be allocated between development and recurring income platforms henceforth.

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision.

The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.