Between Sep 22 and 27, Wilmar International : F34 +0.27% chairman and CEO Kuok Khoon Hong increased his deemed interest in the global agri-business from 13.44 per cent to 13.46 per cent. This saw Longhlin Asia Ltd acquire 594,800 shares and Hong Lee Holdings (Pte) Ltd acquire 594,800 shares. The 1,189,600 shares were all acquired at an average price of S$3.70 per share.

Between Sep 19 and Sep 21, Wilmar International : F34 -0.27% chairman and CEO Kuok Khoon Hong increased his deemed interest in the global agri-business from 13.42 per cent to 13.44 per cent. This saw Jaygar Holdings acquire 250,000 shares, Longhlin Asia acquire 258,350 shares and Hong Lee Holdings acquire 258,350 shares. The 766,700 shares were all acquired at S$3.69 per share.

 

Kuok&rsquo s preceding acquisitions were between Sep 8 and Sep 11, with 1,456,500 shares at S$3.66 per share. Before that, 877,100 shares were acquired at an average price of S$3.55 on Aug 25.

 

Kuok has extensive experience in the agri-business industry and has been involved in the grains, edible oils, and oilseeds businesses since 1973 and has served as the chairman of Wilmar International since July 2006. He has gradually increased his total interest in Asia&rsquo s leading agribusiness group, from 12.20 per cent in May 2017.

 

Wilmar International is organised into four reportable operating segments, which include food products, feed and industrial products, plantation and sugar milling and others, which includes the group&rsquo s logistics & jetty port services and investment activities.

 

In its H1 FY23 (ended Jun 30), the feed and industrial products contributed 54 per cent of revenue, with food products contributing 42 per cent. Higher volume of sales across all the main businesses of the feed and industrial products led the segment to report an improvement in overall sales volume by 12.7 per cent to 27.9 million MT in H1 FY23.

 

The overall sales volume for the food products also grew by 5.5 per cent to 14.6 million MT for H1 FY23, with stronger sales volume recorded for its medium pack and bulk products. While both segments reported higher sales volume, both reported declines in H1 FY23 profit from H1 FY22.

 

For feed and industrial products, this was mainly due to much lower margins for the mid and downstream tropical oils operations. For food products, this was due to unfavourable sales mix, lower sales volume from its consumer products and weaker margins, because of high feedstock costs for the flour business. For the H1 FY23, 52 per cent of the revenue was reported to China.

 

Wilmar International also announced last week that Wilmar&rsquo s board of directors had appointed its independent non-executive director Jessica Cheam as a member of its Board Sustainability Committee, with effect from Oct 1, 2023.

 

INSTITUTIONS were net sellers of Singapore stocks over the five trading sessions through to Sep 21, with S$205 million of net institutional outflow, while 24 primary-listed companies conducted buybacks with a total consideration of S$22.1 million.

 

OCBC : O39 +1.04% led the share buyback consideration tally, buying back 1.2 million shares at an average price of S$12.67 per share, followed by Olam Group : VC2 0%, which bought back 2.7 million shares at an average price of S$1.08 per share. StarHub : CC3 +2.75% also bought back 1.28 million shares at an average price of S$1.09 per share.

 

Leading the net institutional outflow over the five sessions were DBS : D05 +0.09%, UOB : U11 -0.14%, Thai Beverage : Y92 -0.88%, OCBC, Keppel Corporation : BN4 +0.15%, Frasers Logistic & Commercial Trust : BUOU -0.89%, Singapore Airlines : C6L -0.15%, Seatrium : S51 0%, CapitaLand Investment : 9CI +0.97% and CapitaLand Integrated Commercial Trust : C38U -1.06%.

 

Singtel : Z74 0%, Singapore Exchange : S68 -0.41%, Mapletree Industrial Trust : N2IU -1.36%, Digital Core Reit : DCRU -2.75%, Sembcorp Industries : U96 -0.2%, CapitaLand Ascendas Reit : A17U -0.36%, Mapletree Pan Asia Commercial Trust : N2IU -1.36%, AIMS Apac Reit : O5RU -0.77%, Yangzijiang Financial Holding and DFI Retail Group : D01 -1.1% led the net institutional inflow over the five sessions.

 

The five trading sessions saw another 60 changes to director interests, and substantial shareholdings filed for close to 30 primary-listed stocks. This included 14 company director acquisitions with one disposal filed, while substantial shareholders filed 11 acquisitions and four disposals.

Wilmar International chairman and CEO Kuok Khoon Hong increased his deemed interest in the company following the release of its FY22 (ended Dec 31) financial results.

 

Over the four sessions, HPRY Holdings acquired 5,635,200 shares, Longhlin Asia acquired 1,630,900 shares and Hong Lee Holdings acquired 1,630,900 shares.

 

The 8,897,000 shares were acquired at an average price of S$3.64. The consideration of the acquisitions totalled S$32,421,859, increasing Kuok&rsquo s total interest in Wilmar from 13.24 per cent to 13.38 per cent.

 

Kuok is deemed to be interested in Wilmar shares held by HPRY Holdings, HPR Investments, Hong Lee Holdings, Kuok Hock Swee & Sons, Longhlin Asia, KHS (Hong Kong) (formerly known as Pearson Investments), Jaygar Holdings, through trust accounts controlled by him and through his spouse Yong Lee Lee.

 

His preceding acquisition was on May 31, with Longhlin Asia and Hong Lee Holdings both acquiring 1.5 million shares of Wilmar at an average price of S$3.907 per share.

 

Kuok has extensive experience in the agribusiness industry and has been involved in the grains, edible oils, and oilseeds businesses since 1973. He has served as the chairman of Wilmar International since July 2006.

 

Prior to the acquisitions, on Aug 11, Wilmar reported a net profit of US$550.9 million for its H1FY23 (ended Jun 30), compared to its record US$1.16 billion in H1FY22.

 

Revenue for H1FY23 declined 10 per cent to US$32.54 billion from H1FY22, as prices of most commodities decreased, which was partially offset by higher sales volume during the period.

 

Kuok noted that most of Wilmar&rsquo s markets, except for India, experienced a slowdown in Q2FY23.

 

He added that the results were further impacted by lower palm oil and fertiliser prices, as well as lower processing margins for the group&rsquo s mid and downstream operations and that this was partially offset by strong performance from the sugar and shipping divisions.

 

He also maintained that the group has made good progress in its new businesses such as condiments, food park, and central kitchen projects which he believes will become significant contributors to the group&rsquo s operations in future.

 

Barring unforeseen circumstances, the group believes H2FY23 will be better than H1FY23. The global leader in processing and merchandising of edible oils, oilseed crushing, sugar merchandising, milling, and refining, production of oleochemicals, specialty fats, palm biodiesel, flour milling, rice milling, and consumer pack oils employs a workforce of around 100,000.

 

INSTITUTIONS were net buyers of Singapore stocks over the five trading sessions through to Aug 17, with S$256 million of net institutional inflow, while 21 primary-listed companies conducting buybacks with a total consideration of S$36 million.

 

DBS, UOB, Singapore Technologies Engineering, OCBC, Seatrium, Singapore Exchange, Mapletree Logistics Trust, Yangzijiang Shipbuilding, ComfortDelGro Corporation and HongkongLand led the net institutional inflow over the five sessions.

 

Meanwhile, Venture Corporation, Singtel, Frasers Logistics & Commercial Trust, Sats, Jardine Matheson, City Developments, Sembcorp Industries, Suntec Reit, Keppel Corporation, and Nanofilm Technologies International led the net institutional outflow over the five sessions.

 

The five trading sessions saw 90 changes to director interests and substantial shareholdings filed for close to 50 primary-listed stocks.

 

This included 15 company director acquisitions with one disposal filed, while substantial shareholders filed 11 acquisitions and seven disposals.

 

Acquisitions were filed for directors/chief executives of Wilmar International, Datapulse Technology, QAF, JB Foods, Annaik, Baker Technology, Sinostar Pec Holdings, United Hampshire US Reit, Yangzijiang Financial Holding, Bonvests Holdings, Elite Commercial Reit, Ascent Bridge and Darco Water Technologies

 

Wilmar is among the world&rsquo s largest palm oil processors and is China&rsquo s biggest soybean processor. 

SINGAPORE &ndash Trouble could be brewing for agri-commodities processor Wilmar International as financing costs rise and profits come under pressure from greater competition, analysts said.

 

Wilmar&rsquo s net debt &ndash US$26.6 billion (S$36.1 billion) as at June 30 &ndash is among the highest on the Singapore Exchange and exceeds the firm&rsquo s market value of $23 billion, noted Aletheia Capital analyst Nirgunan Tiruchelvam this week.

 

Aletheia Capital, an investment company, has a sell recommendation on Wilmar, and its profit forecasts for the 2023 financial year are 40 per cent below consensus estimates. There are 13 buy calls and two holds on Wilmar, noted Bloomberg.

 

While it is not unusual for commodity traders to have higher debt levels than companies in other industries owing to the need to manage inventory levels and price volatility, Mr Tiruchelvam warned that Wilmar&rsquo s high debt means interest rate expenses could spike and put further strain on earnings.

 

The analyst estimated that Wilmar&rsquo s net interest costs could hit a high of US$760 million this financial year, up from US$253 million in 2021.

 

Meanwhile, Wilmar&rsquo s return on invested capital has lagged behind its average cost of capital in recent years, Mr Tiruchelvam said, a trend he expects to continue over the next three years.

 

He noted that Wilmar incurred capital expenditure in 2022 of around US$2.5 billion, which encompassed the construction of new palm oil refineries. Palm oil prices were already falling, and are now down by more than 50 per cent since last year, owing to mounting inventories in Malaysia and Indonesia.

 

Global soybean production is also expected to hit record levels at a time when demand has waned in India, one of the world&rsquo s largest importers. Soybean futures are down by 17 per cent from their 2018 peak.

 

Futures prices reflect market expectations about the forward prices of underlying assets.

 

Wilmar is among the world&rsquo s largest palm oil processors and is China&rsquo s biggest soybean processor, which also means it carries larger inventories that could be at risk of devaluation if demand falls, Mr Tiruchelvam said.

 

A Wilmar spokesman told The Straits Times that the bulk of the company&rsquo s debt comprises short-term trade financing facilities used to obtain raw materials, and these loans can be obtained in currencies with lower interest rates, such as the yuan.

 

He added that besides debt financing, Wilmar also deploys internally generated funds for capital expenditure.

 

Last Friday, Wilmar reported earnings of US$550.9 million for the first half ended June 30, down 52.7 per cent from the same period last year, while revenue fell 10 per cent to US$32.5 billion.

 

The company said net loans and borrowings decreased, leading to an improvement in its net gearing ratio to 0.89 times in the first half, from 0.94 times in 2022.

 

The ratio assesses how much a company relies on debt to finance its operations and investments compared to its own funds.

 

Chairman and chief executive Kuok Khoon Hong said the 2023 first-half results were significantly lower than the first half of 2022 due to a slowdown in sales of its consumer products, lower palm oil prices as well as lower processing margins at some of its refineries. Operating costs also rose.

 

Despite the lower earnings, Wilmar maintained an interim dividend of six cents a share.

 

Mr Kuok expects the second half of the year to improve as Wilmar&rsquo s new condiments and central kitchen businesses begin to contribute more to revenue.

 

The spokesman added that the second half is typically stronger than the first &ldquo due to seasonal holidays in China, such as Mid-Autumn Festival, Golden Week as well as consumers stocking up ahead of Chinese New Year&rdquo .

 

Companies in which Mr Kuok has a deemed interest in purchased around 8.9 million Wilmar shares at between $3.56 and $3.695 apiece this week, taking his deemed stake from 13.19 per cent to 13.38 per cent.

 

The shares closed on Friday at $3.60, up 0.28 per cent, but they have fallen 12.41 per cent since the start of the year.

 

At those levels, Mr Tiruchelvam noted that Wilmar stock is overvalued in light of the faltering returns, poor earnings growth and rising risks, and should be worth just $2.58 in the next 12 months.