Brokers' take

Wilmar International | Buy Target price: S$3.59 July 4 close: S$3.04 RHB Research, July 4

We reiterate "buy", with a target price of S$3.59 reflecting an 18 per cent upside. We believe Wilmar's share price has come down on the back of looming uncertainties over the imminent China-US trade war. However, US soybean prices have also plummeted significantly since the 25 per cent tariff recommendation. This should help to mitigate pressure on its raw material costs, even if the tariff was implemented. As such, we think the recent retracement in share price offers a good opportunity to accumulate the stock.

With soybean as one of its key commodities, Wilmar is likely to be affected by a trade war between the US and China. However, we believe all is not bleak for the company. The Chicago soybean futures contract has declined by 20 per cent to US$8.48/bushel (bu) from its peak in March, after the tariff recommendation. Therefore, even if the 25 per cent tariff comes into effect, the cost of US soybeans (futures price + 25 per cent import duties) is likely to increase to US$10.60/bu, similar to pre-trade war levels.