Venture

Venture - it has managed to bounce-off from the oow if $18.50 and rises higher to fill up the Gap if 60 cents dividend, this is rather bullish!

Current price of $21.88 has managed to stay well above it's 200 days moving average,this is rather positive.

Looks like it may move up to tetest $22.30. Crossing over with ease + good volume that mat drive the price higher towards 22.90.

Not a call to buy or sell.

Please do your own due diligence.

A few weeks ago!

Venture - It share price tumble more than 12% from $28.82 to close at $25.29.



This could be due to:

" Shares in the cigarette giant plunged as much as 18 percent after its latest earnings report showed that $4.5 billion spent on four new products are failing to win over new customers. Sales growth of the iQos, a device that heats a tobacco plug without setting it on fire, has been slowing after initial success in Japan.

Philip Morris, which sells Marlboros outside the U.S., reported revenue excluding excise taxes of $6.9 billion, less than the $7.03 billion projected by analysts in a Bloomberg survey. The share decline, to as low as $83.50, was the biggest since the company split from Altria Inc. in 2008. The stock had fallen 4 percent this year through Wednesday’s close of trading. "

quote : https://www.bloomberg.com/news/articles/2018-04-19/philip-morris-sales-disappoint-as-cigarette-demand-slips-further

I think Venture could be one of the contract manufacturer for this iQos product for Philip Morris. I think the declining grow rate for this iQos product may affect their future earnings.

Looking through their financial numbers for the past 5 years, we can notice that the company has been able to consistently growing its Total Revenue from 2,329.551m in 2013 to 4,004.539m in 2017.
This is quite impressive.

Next , we take a look at the Net Income figure which has also been increasing from 131.13m in 2013 to 372.82m in 2017. An increase of almost more than 200%. 

EPS has also been growing at CAGR of 31% from $0.319 in 2013 to $0.943 in 2017. This is growing at a high double digits growth rate which is pretty encouraging.

The Total Assets has also been growing /increasing from 2013 to 2017 as per the table below:

This is a Net Net Position company as can be seen the total current Assets of 2,276.156m is more than sufficient to cover its Total Liabilities of 976.141m. Generally, the company has no problem to service it debts.

Ops cash flow is also very healthy which is clocking at CAGR of 40% as can be seen from the table below, the Ops cash flow in 2013 was 106.5m versus 448.5m in 2017. 

Return of Assets and Return of Equity has also been generally increasing from a low single digit grow to a high single digits grow of 9%. And 7.2% to 18% in 2017..This show that the company is capable of demostrating and enhancing the business value.

I have roughly workout the EPS intrinsic value using CAGR of 31% for past 4 years (2013 to 2017) and a discount factor of 12% ( MOS) , the fair value turns up to be around $24.65 .

Interestingly, i have also tried to workout the Ops cash flow intrinsic value using CAGr of 40% for past 4 years ( 2013-2017) , a discount factor of 12% , the fair value is about $24.00.

Therefore, in my view, the current price of $25.29 is trading at a premium level/ above it fair value.

Also the declining sales for iQos may also affect their rev going forward and it may also impact their fair value.

I think investor has to gauge for themselves whether to lock in profit or exit and wait for further insight for next few quarters results.

Dividend has increased marginally from 50 cents to 60 cents in 2017. Yield is about  2.03%

NAV of $7.08 ,  P/B is 3.38 times.


rolling EPS of 0.994, rolling PE of 24.08 times.

Not a call to buy or sell.

Please do you own due diligence.

Trade/Invest base on your own decision.

quote: Jeremyowtaip,I also dug through some historical financial information on Venture Corp. It gives me the impression that it's operating environment is challenging as revenues, operating profits, net profits have dipped over the past decade but recovered in recent years and especially the most recent FY17, the revenue, operating profit and net profit broke new record high.

The big question is whether going forward, can this global giant leader in the electronics and manufacturing service provider continue to grow and break even more record highs. By the outlook painted by the chairman and CEO in their FY17 annual report, it seems that they are positioning themselves in various areas they serve to foster growth. Their chief financial officer also mentioned in one of the article link below that their clients which are global leaders in electronics and manufacturing industries rely on Venture Corp for their strong R&D capabilities while the clients can focus on what they do best in their own businesses. Thus, the business model of Venture Corp is such that the various clients they serve will be sticky to Venture Corp. However, the chairman and CEO did pointed out that 2018 maybe a volatile year for them.

I am not sure what the chairman and CEO means by year 2018 maybe volatile. We do see a recent news of Philip Morris, one of the many clients which Venture Corp serves which is involved in selling IQOS (I Quit Ordinary Smoking) devices revealed in it's recent earnings call that their sales of IQOS may fall short of their ambitious expectations. According to Venture Corp's FY17 annual report based on the CIMB article link below, only one client accounts for more than 10% of Venture Corp's FY17 revenue of which CIMB thinks it is not Philip Morris. Therefore, this recent negative news will still impact Venture Corp's revenue this year 2018, but it is likely not a significant impact since the potential contribution to Venture Corp's revenue is not more than 10% of it's total revenue.

Venture Corp has strong balance sheet in a net cash position. It has been generating good amount of positive operating cashflows for the past decade. And it's required capital expenditures (capex) every year have been small resulting in high amount of free cashflows generated for the past decade every year. The small amount of capex requirement every year could be so as Venture Corp is more of a service provider for it's clients rather than a manufacturer, therefore it need not expend high capex to purchase a whole lot of plants and equipments.


I also checked up the compounded annual growth rate (CAGR) of it's diluted EPS over the past 5 years since it's profitability has improved over the past 5 years. Venture Corp has grown it's diluted EPS at a CAGR of 20.68% over the past 5 years. Since Venture Corp's latest FY17 performance was an exceptional year and I am not sure whether it can parallel such exceptional performance continually for the next 7 years of a business cycle, I will take a very conservative stance and estimate that it can only grow it's diluted EPS at CAGR of 6% for next 7 years upon it's current record breaking diluted EPS factoring in that the chairman and CEO mentioned before that 2018 is likely a volatile year for them. Therefore assuming this CAGR of 6% for it's diluted EPS going forward, using my method of estimation, I work out the fair share price of Venture Corp to be around $26.65. Based on one of the article link below by CIMB Research, their target price for Venture Corp is $30.81.

Venture Corp last closed at $25.29. Thus, I believe we are about there in terms of a fair share price for it. If an investor is worried whether the share price still has room for falling, then my suggestion is to wait for further price weakness to get it even cheaper or wait for the price to stabilise before buying. The cheaper one gets it below the estimated fair share price, the larger margin of safety one will receive to cushion the impact from Philip Morris affecting Venture Corp. Any further selling of the shares based on what I can see could be an over-exaggerated reaction to the impact from Philip Morris on Venture Corp's performance this year.

Venture Corporation Limited, together with its subsidiaries, provides technology services, products, and solutions in the Asia Pacific. The company operates through Electronics Services Provider, Retail Store Solutions and Industrial, and Components Technology segments. It offers manufacturing, product design and development, engineering, and supply-chain management services to the electronics industry. The company also designs, manufactures, assembles, distributes, and trades in electronic, mechanical, and computer related products and peripherals; manufactures and sells terminal units; develops and markets color imaging products for label printing; designs, integrates, and trades in electronic security systems; and develops and supports information systems. In addition, it engages in the provision of manufacture, design, engineering, customization, and logistics and repair services; manufacture, design, fabrication, stamping and injection, metal punching, and spraying of industrial metal parts, tools, and dies; and design, customization, and marketing of tool-making and precision engineering solutions. Further, the company manufactures plastic injection molds and moldings with secondary processes and subassembly; and provides manufacturing services to electronics equipment manufacturers, as well as offers management services. Additionally, it imports and exports electronic parts, components, equipment, devices, and instruments. Venture Corporation Limited was founded in 1984 and is headquartered in Singapore.

Hi-P

Hi-P : The S&P 500 gained 0.7 percent and closed at 2,733.01 as industrials jumped 1.5 percent. The Nasdaq composite climbed 0.5 percent to 7,394.04 as semiconductors pushed tech higher. (Cnbc.com)

Chart wise, yesterday it has managed to close with a nice bullish pin bar ,this is rather bullish! Looks like Bull is able to take control of the Bear and close well at 1.41 . 

It may likely move up to test 1.50 then 1.52 with extension to 1.56. 

Not a call to buy it sell.

Please do your own due diligence.



Latest 1Q result for your reference. Gross Profit increased 13% to reach 37.8m. 
Net Profit increase marginally of 1.3% to 12.1m after factoring the foreign exchange loss of 13m..

Hi-P International Limited operates as an integrated contract manufacturer serving the telecommunications, consumer electronics, computing and peripherals, lifestyle, and medical and industrial devices industries. The company operates through three segments: Precision Plastic Injection Molding; Mold Design and Fabrication; and Provision of Sub-Product Assembly and Full-Product Assembly Services. It manufactures and sells molds and special tools, related housing appliance plastic components and equipment, and water treatment equipment; plastic components and plastic product modules; mold base and components; electric components and electronic communication equipment; in-mold decoration lenses; precision stamped metal components and precision tools; and metal and non-metal stampings, as well as provides spray painting, engineering support, maintenance, and technology consultation services. In addition, the company engages in the manufacture, wholesale, import and export, and sale of electronic telecommunication devices, housing appliances, automated equipment, and related components. Further, it manufactures and sells trays, mobile phones, telecommunication products, digital cameras and related electronic products, and electric toothbrushes; assembles coffee machines and parts, as well as provides related maintenance and after-sales services; and offers investment and management consulting services. Additionally, the company engages in the assembly and provision of ancillary value-added services, primarily surface finishing services. It has operations primarily in the People's Republic of China, Singapore, Malaysia, Thailand, Europe, the United States, the rest of Americas, and internationally. The company was founded in 1980 and is headquartered in Singapore.

UMS

UMS reports net profit of S$11.3 million for 1QFY2018

Singapore, May 11 2018 - SGX Mainboard-listed UMS Holdings Limited (“UMS” or “The Group”) continued to reward shareholders with a proposed 1 cent tax-exempt interim dividend as it maintained its profitable track record. The Group reported a net profit of $11.3 million for the first quarter of the financial year 2018 (1Q2018) ended 31 March 2018. Net profit was maintained despite revenue easing 10% to $37.5 million for the quarter.

The lower Group turnover was due to a 9% dip in revenue from the semiconductor business while sales from its “Other” segments fell 44%. Most of the Group’s revenue is denominated in USD which has depreciated against the SGD when compared to 1Q2017.

The Group's profitability was boosted by better gross material margins in 1Q2018 which jumped to 57% from 51% in 1Q2017 as it benefitted from higher component sales vs Integrated Systems sales. Component sales enjoy a higher margin compared to Integrated Systems sales. The improved gross margin reflects the Group’s success in growing its component business to boost its bottom line. The Group has also slashed its income tax expense by 30% as it booked more profits in its Malaysian subsidiary which enjoys Pioneer Tax incentive in Malaysia. Depreciation charges went down by 9% as some of its fixed assets were fully depreciated. Rental fees were cut by 46% as UMS shifted more of its operations to Malaysia. The Group also registered a maiden profit contribution of S$16,000 from its newly acquired associate - Catalist-listed JEP Holdings Ltd.

Profits attributable to shareholders edged up 2% to S$11.4 million in 1Q2018 vs $11.2 million in 1Q2017

Within the semiconductor segment, those of Semiconductor Integrated System decreased 24% to S$18.4 million in 1Q2018 from S$24.2 million in 1Q2017; while revenue from component sales went up by 12% to S$18.7 million - up from S$16.7 million in 1Q2017. Geographically, the first quarter saw revenue from Singapore dip 24% due to weaker demand for the semiconductor Integrated System sales; while US component sales for new system built rose 47% compared to 1Q2017. Revenue from Taiwan rose 16% on the back of higher component spares sales while those in “Other” regions fell 80% due mainly to lower component sales to a customer in China.

Strong Cashflow 

UMS continued to achieve strong cash flow with $15.2 million in net cash from operating activities and $12.0 million in free cash flow in 1Q2018. Bank borrowings pared down by $2.0 million with the Group’s net cash and cash equivalents remaining healthy at S$23.8 million as of 31 Mar 2018. During the first quarter, the Group made an investment of $28.2 million for a 28.6% stake in Catalist-listed JEP Holdings Ltd, in line with its diversification strategy.

The Group’s prospects remain bright in 2018 because of sustained high demand in orders from its key customer. The global semiconductor industry is predicted to continue its strong growth trajectory despite challenges to world economies posed by the ongoing US-China trade dispute

The Group is progressing well with its due diligence for the proposed acquisition of a 70% stake in a non-ferrous metal alloys specialist, Starke Singapore Pte Ltd (“Starke”) which will be funded by internal resources. This proposed deal is in line with UMS' strategy to strengthen its upstream integration to reap cost savings and enhance business and operational synergies within the Group through a more efficient supply chain to serve global customers.

Barring any unforeseen circumstances, prospects remain bright for FY2018.

Quote : http://infopub.sgx.com/FileOpen/UMS%201Q2018%20Press%20Release%20-%20Final.ashx?App=Announcement&FileID=505143

From TA point of view, it has turned bearish after hitting the high of 1.35 on 16 Mar.
The price was corrected from 1.35 to a low of $1.00 last Friday.

It is now trading below most of its Moving average such as 20,50 & 100 days MA.

Currently, the price is coincide with its 200 days moving average.

Hopefully , we may see a bounce-off from here and rises higher to retest 1.08. If not, breaking down of 99 cents would be rather ugly. It may continue to go down to retest 93.5 cents then 90 cents.

Not a call to buy or sell.

Please do your own due diligence.

Japfa

Japfa kickstarts the year with significantly higher revenue and profitability

• The Group recorded higher profitability, driven by strong performance from PT Japfa Tbk

• Animal Protein Other narrowed losses, and generated positive EBITDA in 1Q2018

Singapore, 30 April 2018 – Leading agri-food company, Japfa Ltd (“Japfa”, the “Company”, or together with its subsidiaries, the “Group”) today posted a 58.2% rise in EBITDA to US$103.2 million for the first three months ended 31 March 2018 (“1Q2018”), on the back of a 14.9% revenue increase to US$845.5 million. Core PATMI w/o Forex1 more than tripled to US$28.3million, from US$7.3 million in the corresponding period last year.

The significant improvement in profitability was driven by PT Japfa Tbk’s margin and volume expansion. At the same time, Animal Protein Other (“APO”) narrowed its losses and generated positive EBITDA in 1Q2018, after navigating a challenging year throughout 2017.

On 30 April 2018, the Group completed the acquisition of Black River Funds’ interest in its dairy business (“AustAsia”) and now owns 100% of AustAsia. The Consideration of US$263.1 million was satisfied in full by a cash payment of US$223.0 million which was funded by bank financing, and the issue of 90 million ordinary shares in Japfa Ltd at the issue price of S$0.60 (US$0.45) per share based on the exchange rate of 1.3465 (which is approximately US$40.1 million in aggregate). The total number of issued shares of Japfa Ltd (excluding treasury shares) has increased from 1,756,678,891 ordinary shares to 1,846,678,891 ordinary shares as a result.

The Group has also started recognising 100% contribution from its Dairy business, with effect from 1 January 2018.

The company has 4 different streams of businesses revenue to derive from :

PT Japfa Tbk PT 

Japfa Tbk delivered solid growth in 1Q2018. Revenue rose 16.2% to US$576.3 million, driven by marked improvement in sales volumes across the poultry division. In particular, sales volume for poultry feed grew 14.5%. Operating profit nearly tripled from US$19.5 million a year ago to US$56.4 million in 1Q2018, as operating margin expanded from 3.9% to 9.8%. This was driven by strong growth in poultry feed margin on lower raw material costs, as well as higher ASPs for day-old-chicks and broilers. Another major highlight of PT Japfa Tbk’s performance was the turnaround recorded by its broiler business, from an operating loss of US$5.3 million to an operating profit of US$18.1 million. Poultry feed remains a key driver of profitability across the Group’s animal protein business.

Animal Protein Other

 In Vietnam, operating losses in 1Q2018 narrowed year-on-year to US$2.0 million from US$7.7 million in 1Q2017. The improvement in Vietnam’s profitability was due to (i) lower swine fattening costs as a result of the Group’s cost containment initiatives; (ii) lower costs for feed raw materials; and (iii) higher poultry ASPs. On a quarter-on-quarter basis, Vietnam’s swine prices picked up 11% in 1Q2018 but remained at levels below cost. Swine prices rose during the Tet festival in February 2018, and held steady even after the Tet holiday. In the near term, the curtailed demand following China’s import restrictions since 4Q2016 will continue to affect Vietnam’s swine market. Recovery in swine prices is expected when supply ultimately readjusts down to the new level of demand. The losses in Vietnam’s swine business were compensated by profitability generated by Vietnam’s poultry business, as well as continued profits from the feed businesses in Vietnam, Myanmar and India. As a result, APO reduced its overall Profit After Tax from negative US$6.5 million in 1Q2017 to negative US$1.6 million in 1Q2018. APO recorded a positive EBITDA of US$2.6 million in 1Q2018.

Dairy

 Despite pressure on raw milk prices, Dairy generated consistent profits, with higher milk yields and volumes. Revenue grew 20.2% to US$99.5 million, on growth in raw milk and ESL3 sales volumes in China and South-east Asia respectively. While overall operating profit increased 5.1% to US$19.3 million, operating margin dipped due to lower raw milk prices in China, as well as higher A&P costs in Indonesia as the Group launched a new range of Yogurt and UHT Small Packs – which are targeted to be one of the growth drivers for the Dairy business in Indonesia. Meanwhile, milk yields in China improved from 38.6Kg/head/day to 38.9Kg/head/day. Milkable cows in China increased 8.7% to a population of 42,010 heads as Farm 7 started fully milking in March 2018. Looking forward, the Group will continue to focus on improving milk yields and volumes in China to mitigate price fluctuations. In Indonesia, efforts will be channeled into brand building and widening its range of Greenfields dairy products to capture a larger target segment.

Consumer

 Food The operating landscape for Consumer Food remains challenging amidst heightened competition, particularly in the ambient food sector. In 1Q2018, due to lower sales volume and ASPs for ambient food (eg sausages) year-on-year, Consumer Food recorded an operating loss of US$1.4 million against a 3.1% decline in revenue. However, the Group has rolled out a few initiatives to address the competition. They include raising ASPs for frozen food, brand rejuvenation with a clearer packaging and brand positioning, and improving the taste and quality of “So Good” products. This strategy is beginning to bear fruits, evident from the breakeven EBITDA achieved in 1Q2018, as compared to a loss in 4Q2017. Sales volume of ambient temperature sausages also expanded on a quarter-on-quarter basis.
quote : http://infopub.sgx.com/FileOpen/Japfa%20Ltd%201Q2018%20Press%20Release.ashx?App=Announcement&FileID=502591

From TA point of view, it has a nice breakout of 56 cents on Friday + high volume and close well at 57 cents, this is super bullish!

Short term wise, it may likely move up to 60 cents then 63 cents with extension to 70 cents.

Not a call to buy or sell.

Please do your own due diligence.

Trade/invest base on your own decision.

Japfa Ltd is a leading agri-food producer focused on feeding emerging Asian markets. The Group produces protein staples such as chicken, beef and milk, as well as protein-based consumer food products. From its headquarters in Singapore, Japfa operates its businesses in the fast growing economies of Indonesia, China, India and Indo-China. Backed by two generations of farming experience, it operates industrial-scale farms which are vertically integrated with its downstream food processing operations

Wing Tai

Wing Tai 

NAV $4.09

EPS for first 9 months is 10.87 cents.

Estimate the full year EPS of 15 cents. PE is about 14.1x based on current price of $2.12.

Annual dividend is about 3 cents, yield is about 1.4%.

P/B is 0.51x. Looks like it is trading almost 50% of its NAV.



 For the nine months ended 31 March 2018 (“current period”), the Group recorded a total revenue of S$267.5 million. This is a 31% increase from the S$204.6 million revenue recorded in the nine months ended 31 March 2017 (“corresponding period”). This increase is largely due to the higher contributions from development properties.

 The current period revenue from development properties was mainly attributable to the additional units sold in Le Nouvel Ardmore in Singapore and the contribution from BM Mahkota in Penang. BM Mahkota obtained its Temporary Occupation Permit (TOP) in the current period and the revenue for the units sold has been fully recognized.

 The Group recorded operating profit of S$24.9 million in the current period as compared to S$1.2 million in the corresponding period mainly due to higher contributions from Le Nouvel Ardmore and BM Mahkota as well as the gain on disposal of Huai Hai project in Shanghai.
The Group’s share of profits of associated and joint venture companies increased by 133% to $96.3 million in the current period from S$41.2 million in the corresponding period, largely due to the Group’s share of gain recognized by Wing Tai Properties Limited in Hong Kong from the disposal of Winner Godown Building, an industrial building located in Tsuen Wan.

 In addition, there was contribution from Malaren Gardens in Shanghai from the residential units sold to date and handed over to purchasers in the current period.

The Group’s net profit attributable to shareholders increased from S$10.6 million in the corresponding period to S$89.0 million in the current period.

Cash flow statement for 3rd quarter result seems generating a healthy cash in flow of $144m.

Chart wise, it is on a short term uptrend mode!
Looks like it may retest the recent high of $2.16. Breaking out of $2.16 with ease + good volume, that may propel to drive the price higher towards $2.23 with extension to $2.29.

Not a call to buy or sell.

Please do your own due diligence.

Trade/invest base on your own decision.

Wing Tai Holdings Limited, an investment holding company, engages in property development, property investment, and retailing businesses in Singapore, Malaysia, the People’s Republic of China, and Australia. The company develops residential and commercial properties; and invests in and manages serviced residences under the Lanson Place brand name, as well as manages a boutique hotel in Hong Kong. It is also involved in the manufacture and retail of textile garments; the provision of consultancy and advisory services; and project management and property maintenance activities, as well as in the fund management business.

 As of June 30, 2017, the company operated 206 stores. Wing Tai Holdings Limited was founded in 1955 and is headquartered in Singapore.

Wilmar Intl

Wilmar dir has been buying up share after the released of their first quarter result!

He has snapped up share raning from $3.11 to $3.15.



Without this support ,price may have corrected lower.

• 
  

It has now managed to recover and fill up the Gap at $3.21.
Yesterday closed well at $3.23, looks rather bullish!



It may move up to retest $3.28 soon!

Do take note that it's NAV is about $3.30-$3.40.



Wilmar Intl Went up to touch the high of $3.27 but was being sold down end of the day to close at $3.21 . Down 4 cents from $3.25 yesterday closing price.

It seems like some insider news being leaked prior to result was released after trading hours.

1Q 2018 result, Total revenue was up 5.7% to 11.116m.Net profit was down 37.2 % to US183.4m , EPS of 3.2 (US) due to lower palm oil price and sugar ops loss.

Ops cash flow was healthy generating US1.83m.

NAV of $3.40.

Not a call to buy or sell.

 Wilmar - touch $3.26 again. Looks rather bullish! Breaking out with ease may sail smoothly towards $3.30.

MACD is rising that may likely provide further indication that the share price may likely continue to trend higher.

Price is hovering above the SMA lines. High chance for a nice breaking out moment that may take the price higher to 3.30 and $3.40 and above.

Not a call to buy or sell.
please do your own due diligence.




Wilmar Intl - NAV $3.304, Rolling EPS 0.306, PE 13.721.

Together with Interim dividend of 3 cents. Total dividend is 10 cents. Yield is 3.2% at $3.12 per share. The recent share buying back by company director of 2.44m share at $3.103 per share & 79300 share at $3.18 per share may likely be a boost of confidence.. I have jeep small lots at $3.12 today.


.I am buying for the future growth and may be the listing of their China ipo.. dyodd. Reply to @Sporeshare : Ah.....This is the golden big question! If Wilmar is really pushing for an IPO of their China operations in Shanghai exchange, I think can look at other similar commodity giants that are already listed in Shanghai exchange to see where are they trading now in their price to earnings multiple. That will give us a good gauge what types of multiples we are potentially looking at. Surely, we cannot expect Wilmar to list their China operations at too low a gap from their peer competitors on Shanghai exchange. If that is the case, why still push for IPO listing if the valuation it would fetch is not attractive at all? If want to unlock value by the IPO, might as well unlock it well.

 I attached an article from TheEdgeSingapore which an analyst pegs a target price of $4.10 based on an attractive valuation now, strong crushing margins so far in FY18 and the anticipated listing of its China unit. You can read through the article to see the rationale put forth by the analyst. In any case, we are not trying to be precise in forecasting our target price.

 The analyst puts forth a possible listing of the China unit at up to 23 P/E ratio on the Shanghai exchange. Based on good common sense and my previous sharing, Wilmar's share price definitely has all the good catalysts as we can see currently going for it to reach a higher price level. My previous estimated fair price of $3.18 is based on a worst case scenario. Unless we think Wilmar will eventually fail in all accounts of the prospected catalysts in having weaker overall performance this year and anticipated listing of it's China unit falls through, then worst case scenario may pan out. Thus, the downside as I can see on probability terms is low while upside has high probability of happening. Therefore, if you ask me, is $4 you quoted likely to reach in future? My answer is even if not reaching $4, I think the probability of the share price rising higher from current level in view of all these potential future catalysts is surely there. How about a $3.60 price in future based on my "anyhow" guess? I think that will be already at least a good perk of 11.5% share price gain if it really happens by this year end. $4.10 will be even more "shiok" with a potential return of 26.9% if it really happens within one year's time based on the analyst's target price in this article by

TheEdgeSingapore! I think it is a case of making either more or lesser returns from this bet here on Wilmar. As long as one does not chase at higher price if it should chiong but instead has already accumulated cheap in advance, one should be falling into the case of making more or lesser returns on this bet hopefully within one year's time frame. https://www.theedgesingapore.com/wilmar-kept-add-valuations-strong-crushing-margins-and-upcoming-listing-china-unit Wilmar International. The overall feel I have of this large agricultural international group is that it already has extensive and deep degree of reach in it's agricultural and related businesses in terms of many geographical regions they are in (about 50 countries as reported on their website with about 500 manufacturing plants worldwide) and also the entire value chain they are serving from upstream plantation and harvesting to mid stream processing and refining to downstream distribution and sales of their final products to consumers. On a one decade time frame, Wilmar International has compounded it's revenues at a CAGR of 10.3% which is respectable and not surprising considering how significant this group has grown over the years. It's operating income has compounded at a CAGR of 8.1% over the past decade. It's net income has compounded at a CAGR of 7.7% over the past decade. It's EPS has compounded at a CAGR of 4.1% over the past decade. Again, this looks like a moderate to slow grower over the past decade just slightly better than SATS that we looked at previously in terms of the growth in it's profitability. If we look at their past 5 years trend for the revenue, operating income, net income and EPS, there was a dip in all these metrics after FY12 onwards which only recovered in their FY17 results near to FY12 levels.

 qUOTE : I checked up the palm oil historical prices and indeed it confirmed my thinking that this dip over the past 5 years which only recovered recently was probably correlated to the drop in palm oil price over the past 5 years. Currently, palm oil price has recovered from the lows but still it is now only two-thirds of the last peak price reached in 2012. The big question is whether the palm oil price will continue to recover towards the last peak price reached in 2012 going forward or continue to hold around current price and do a ding-dong in price, sometimes up and sometimes down but no clear up direction for the next few years? This I do not know as I think only insiders of the palm oil industry will know the dynamic factors of global supply and demand affecting palm oil prices. I consider this as outside my circle of competence. But looking at palm oil historical prices, it sure looked quite volatile to me and hard to grasp.{ jeremyowtaip} As such, the various trend on their returns on assets (ROA), returns on equity (ROE) and returns on invested capital have also dipped over the past 5 years and have almost recovered in the latest set of FY17 results to close to same returns as FY12. However, the various returns are still single digits returns in %. For example in FY17, ROA is now around 3% while ROE is around 7.6%. If we stretch further backwards to compare their current returns against one decade ago which the various returns were higher in FY07 of ROA around 6.7% while ROE was around 13.8%, we can clearly see that Wilmar is now not a high return beast as it used to be a decade ago. It seems that it is not easy to attain the same returns as before anymore now that Wilmar has outgrown so much that at it's current size it cannot generate the same returns on assets and shareholder equity as before. Now again, the big question is how will the various returns going forward in future years be like? Will it remain around same level as now or become lower? Size is one thing which makes it increasingly difficult to generate the same level of returns. What if they can grow their revenue and profits further in future years should palm oil prices recover? Maybe there could be a chance to improve their returns though going back to double digits returns likely will be difficult.

This would mean they have to increase their current net profits by another approximately 120% at current size of total assets for example to go back to previous decade ago record of ROA. A jump in 120% increase in net profits at current level of USD 1.22 billion for WIlmar next year based on core businesses and not through some non-recurring disposal of assets? One must be joking to ask the dog to jump over the high wall! The financial leverage of Wilmar has been steady over the years managing their debts level and balance sheet well. Cash flows wise though can be volatile seems to still generate free cash flows at least enough to pay a dividends which has grown over the past decade. Their CAGR for EPS over the past 5 years has been about 0% even though 10 years CAGR was 4.1%. I will factor in a best case scenario and a worst case scenario in estimating their fare share price value taking into account all the above mentioned details of this comment. If we make a best case scenario of Wilmar continuing to grow it's current EPS at CAGR of 4.1% going forward, then using my method of estimation, their fare share price will be $4.25. However, if we make a worst case scenario of a CAGR of 2% on their EPS going forward for next business cycle (7 years), then their fair share price will be $3.18. This is mind-blowing! It all depends on the performance of Wilmar going forward. If they can parallel their historical compounded growth rates on their EPS, then it will be a bonus to buy their shares now at cheap cheap share price! However, should they grow at a lower forward CAGR about somewhere half in % terms on their EPS, then we are exactly getting Wilmar now at fair value $3.18 and it will not be cheap now to buy! This really requires an investor's forward opinion on how Wilmar will perform for next 7 years cycle to decide whether to put in his or her stake at current price. Will this be a value buy or value trap? Hmm Wilmar International has since diversified their commodity businesses over the years into business segments including tropical oils, oilseeds and grains, sugar and biofuels and other investment businesses. This horizontal diversification and vertical integration tapping at all levels of the value chain has allowed Wilmar to grow to it's current humongous size despite being in a general low profit margin agricultural commodity businesses. I forgot to mention another important piece of bright spot for Wilmar! I read up in it's most recent financial report that they are considering looking at an IPO listing of their China rice, flour and related consumer products operations in China.


http://sbr.com.sg/agribusiness/news/wilmar-eyes-china-expansion But things are still in the early stage of assessment. If that were to happen, imagine the craze of investors rushing in for this potential spin-off of their China businesses which will unlock value for shareholders. Then, buying at current share price is now cheap if we factor in this potential unlocking of value from such a future proposition which will increase their profits and returns by some substantial jump if that were to happen some time down the road. It may happen as early as 2019 based on a write-up by Singapore Business Review. Hmm....I am now starting to get somewhat interested after knowing this. Some info on Shree Renuka Sugars I found out. It is the largest raw sugar producer in India and Brazil. As what the others have pointed out, the management was too aggressive in their overseas expansion bet in South America which didn't go well chalking up huge debts. This is because after year 2012, the sugar prices dropped from their peak reached and also correlated to Shree Renuka's operating losses from 2013 to now as sugar prices remain lower and now only recovered to two-third of the peak price reached in 2012. Wilmar has this chance to acquire a controlling stake in Shree Renuka Sugars because the latter chalked up so much debts from their aggressive expansion to South America market which didn't pan out well. Thus, during this current debt restructuring exercise, Wilmar can take this opportunity to acquire a controlling stake in the equity of India and Brazil largest raw sugar producer Shree Renuka Sugars. quote :I will need to examine the financial strength of Wilmar whether they can take on this acquisition without risking themselves too much. But, the offer to acquire a controlling stake in Shree Renuka Sugars by itself sounds to be a wonderful move. If sugar prices should continue to recover to previous peaks in 2012 and earlier, Shree Renuka Sugars may be able to return to better profitability again. The return on invested capital for Shree Renuka Sugars before they went downhill in 2013 are still good. If Wilmar after acquiring Shree Renuka Sugars can turnaround this largest sugar producer in India and Brazil successfully, it will be very good for Wilmar to further expand their sugar business significantly.

PS: Shall investigate whether Wilmar is strong enough to take on this acquisition without stressing their balance sheet too much. Get back to you again. I did an estimation on the required amount for Wilmar to make the acquisition of shares in Shree Renuka Sugars based on regulations of Securities and Exchange Board of India after Wilmar converted it's convertible preference shares to common equity shares and triggered the regulations of the exchange to make an offer to acquire up to 26% of the emerging share capital of Shree Renuka Sugars. The cash outlay needed to acquire up to 26% of the emerging share capital of Shree Renuka Sugars is approximately USD 124 million. Wilmar has about USD 2.96 billion in cash and equivalents plus other bank deposits. It's current ratio stands at around 1.15 based on FY17 financial report. This acquisition requires very small cash outlay for Wilmar as compared to the cash and bank deposits it now has. However, after the acquisition of a controlling stake in Shree Renuka Sugars has been completed, I am not sure how much remaining debts of Shree Renuka Sugars Wilmar will carry as some of the debts owed to the lenders have been converted to equity in Shree Renuka Sugars. I checked up Shree Renuka Sugars balance sheet as at Sep 17. They carried a total of about USD 1 billion worth of total liabilties on their balance sheet. With some of the borrowings of Shree Renuka Sugars converted to equity, the total liabilities should be lesser than this figure. Thus, with Wilmar's existing USD 2.96 billion in cash and equivalents plus bank deposits and if we consider Wilmar's current assets of total about USD 22.6 billion, Wilmar definitely has much more than enough resources to cover the liabilities of Shree Renuka Sugars even after Wilmar completes this acquisition of a controlling stake in it.


 There is no concern at all in acquiring a controlling stake in Shree Renuka Sugars for Wilmar. Instead, Wilmar would have gotten this India and Brazil largest raw sugar producer under it's wings.(jeremyowtaip) But having said that, those few stocks we discussed about like Wilmar and Thai Beverage are good stocks to hold for the longer term as there are future potential catalysts in them. The potential listing of China operations for Wilmar which will unlock value for shareholders and may re-rate share price higher. The future long term contributions to earnings and returns from the new acquisitions for Thai Beverage will outpace the cost of their initial investment. The market position of Thai Beverage has strengthened as a leader in this Southeast Asia region with these acquisitions. The fair share price of Thai Beverage I cannot determine at the moment. But, in future the direction of the share price can only go one way which is up as the new acquisitions start to increase the overall profitability and cash flows further while the debts get slowly reduced over time. For SATS, it is a steady slow grower. Just need a bear market to grab it cheap at fair value or lower than fair value and see the price will bounce back and trade higher than fair value due to so many favourables surrounding it which may continue for a very long number of years ahead.