Hot stock: Wilmar shares fall by over 2%; analysts retain 'buy' calls

SHARES of Wilmar International fell 2.2 per cent to close at S$5.39 on Tuesday, the day after the agribusiness group reported its financial results for FY2020 ended December. But analysts have retained their "buy" calls on the counter.

Shares of Wilmar had fallen as much as 2.6 per cent to S$5.365 during the morning trading session. ShareInvestor data showed no married deals in early trade.

Wilmar had announced on Monday, after market close, a 4.3 per cent increase in H2 FY2020 net profit to US$923.6 million. Revenue increased 24.3 per cent to US$27.9 billion.

Both DBS and UOB Kay Hian (UOBKH) have maintained their "buy" calls on Wilmar following the results announcement. Their respective price targets for the stock are S$6.67 and S$6.40.

DBS's target price values Wilmar's Shenzhen-listed subsidiary Yihai Kerry Arawana Holdings (YKA) at 23.8 times earnings, and assumes YKA will contribute 60 per cent of Wilmar's FY2021 net profit. The rest of Wilmar's operations are pegged at 17 times earnings.

In its report, DBS said it believes this valuation is conservative considering that YKA is trading at above 40 times earnings.

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UOBKH's target price values the group's China operations at 26 times earnings, and its non-China operations at 11 times.

The research house believes YKA is currently overvalued, given that its consumer staple peers are trading at an average of 40 to 45 times earnings with the exception of Foshan Haitian.

"Wilmar's current market value is only about 38 per cent of YKA's, making Wilmar a cheaper entry for exposure to China's consumer staples," said UOBKH in a report on Tuesday.

Meanwhile, RHB has reiterated its "buy" call on Wilmar while raising its target price to S$6.30 from S$6 previously after tweaking earnings estimates up post the results release.

RHB said it believes the group's near-term prospects remain positive. It highlighted the possibility of the group listing other business units to unlock more latent value in the longer term.