WILMAR INTERNATIONAL
Brokers: OCBC Investment Research
Call: Hold
Target price: $3.70
Wilmar International saw a strong fourth quarter in 2016 with a 27 per cent increase in revenue to US$11.9 billion (S$16.7 billion), and a 70 per cent increase in net profit to US$561 million year on year.
The results were driven by better performance across all segments, contribution from associates as well as recognition of deferred tax assets of US$142.1 million.
Looking ahead, crude palm oil price is expected to ease and production is anticipated to come back.
In addition, Tropical Oils' downstream business should remain supportive to give decent overall margins. Steadier outlook is expected for earnings across segments, as well as better contribution from associates/ joint ventures as the group seeks to continue tapping opportunities.
AURIC PACIFIC GROUP
Brokers: CIMB
Call: Buy
Target price: $1.96
The sun continued to shine on Auric Pacific in the financial year 2016.
Core net profit surged 177 per cent year on year to $19.3 million, driven by improved profitability of all business segments. Net cash position strengthened to $87.5 million, forming 42 per cent of market cap.
Given that most of the rationalisaton of its non-performing food retail business is completed today and most of the necessary impairments have been provided for, Auric is poised for a refreshed start for financial year 2017, with increased optimism for its 2017-2018 earnings outlook.
Auric's Sunshine brand of packaged bread has been gaining shelf space in local supermarkets and grocery stores over the past year against its key competitor, Gardenia. In addition, Auric has launched an increasing variety of buns under Sunshine and intensified advertising efforts.
A major shareholder's voluntary cash offer was announced on Feb 7. Since then, the offeror has acquired approximately 4.4 million shares via market transactions, representing 3.5 per cent of Auric's total issued share cap.
The offeror needs to collect another 12.3 million shares (9.78 per cent) by the close of the offer (March 24) to successfully delist Auric. Investors should stay vigilant on the acceptance level.
SEMBCORP MARINE
Brokers: CIMB
Call: Buy
Target price: $1.88
The company's net profit for the 2016 fourth quarter was $34 million, which included non-recurring marked to market losses of $16 million on investments. It was offset by $9 million tax credit from unutilised tax losses and a net foreign exchange gain of $36 million due to a stronger US dollar and British pound.
Excluding the foreign exchange impact, earnings before interest and tax (Ebit) was 6.5 per cent in financial year 2016, versus 10.7 per cent the previous year. Ebit margins of 6.7 per cent and 9 per cent are forecast in financial year 2017-18, assuming a less volatile swing in currencies.
The company is in discussions for modularised LNG and LPG solutions. Each contract could be over US$1 billion (S$1.41 billion). Management plans to recruit and re-train its staff to equip them with non-drilling LNG skills, signalling that a contract is close. It is also in discussions with Petrobras for more hull contracts in Brazil.
