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Over 25-yrs in Global Materials & Soft Commodities

Charles Spencer

Equity Bottom-Up

<p><strong>INVESTMENT VIEW:</strong>  Management sounded confident that they could list its China operations at ~20x PER and unlock value in <a href="https://www.smartkarma.com/entities/172" target="_blank" data-smartkarma-citation="entities:172:1">Wilmar International (WIL SP)</a> shares by 1) paying a special dividend from the listing proceeds, and 2) investors using the SOTP valuation to see deep value in the ex-China portion of the business.  However, our review of Wilmar-China’s listed A-share peers highlights significant vulnerability in management’s key assumption on its potential listing multiple.  We recommend investors take profits from the recent rally in the shares and expect them to trade back towards the lower end of its recent trading range. </p>

INVESTMENT VIEW:  Management sounded confident that they could list its China operations at ~20x PER and unlock value in Wilmar International (WIL SP) shares by 1) paying a special dividend from the listing proceeds, and 2) investors using the SOTP valuation to see deep value in the ex-China portion of the business.  However, our review of Wilmar-China’s listed A-share peers highlights significant vulnerability in management’s key assumption on its potential listing multiple.  We recommend investors take profits from the recent rally in the shares and expect them to trade back towards the lower end of its recent trading range. 

Foshan Haitian Flavouring & Food (603288 CH)

Wilmar: China Listing at ~20x Might Prove Too Optimistic.