Adani news unlikely to impact Wilmar materially, says DBS
Michelle Zhu
WILMAR International is not likely to see a material impact from recent negative headline news surrounding its Indian associate Adani Group, according to DBS Group Research.
On Thursday (Feb 2), DBS said its analyst does not expect the food giant to recognise any impairment losses from its joint venture (JV) with Adani – even in the worst-case scenario where the Indian multinational conglomerate’s share price drops below initial public offering (IPO) levels.
The research house also noted that earnings from its JV with Adani amounted to just US$50 million in FY2021 – which is non-material compared to Wilmar’s full-year earnings of US$1.9 billion.
Highlighting that Wilmar’s shares have underperformed the Straits Times Index (STI) over the past two months, DBS believes any share price weakness it experiences due to news related to Adani is likely to be more sentiment-driven.
“Our plantation analyst continues to favour Wilmar for its relatively steady earnings outlook compared to peers, and attractive valuation trading at -2 standard deviation of its five-year average price-to-earnings,” it added.
DBS’ views come a week after short-seller Hindenburg Research issued a report alleging Adani had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades”, sparking concerns on Wilmar’s JV with Adani, Adani Wilmar.
In response, Wilmar on Tuesday told Bloomberg it would continue to support its Indian associate, highlighting that Adani Wilmar had undergone a full IPO process under the scrutiny of regulators.
Shares of Wilmar were trading S$0.01 or 0.2 per cent lower at S$4.08 as at 10.59 am on Thursday.
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