Wilmar International I Buy
Broker: OCBC Investment Research
Feb 23 close: S$3.13
Fair value: S$3.51
Wilmar reported a 3.3 per cent year-on-year fall in revenue to US$11.5 billion (S$15 billion) and a 23.8 per cent drop in net profit to US$427.5 million in the fourth quarter of FY2017, bringing full-year net profit to US$1.2 billion - which is a 25.4 per cent increase compared with FY2016. This was better than our and the street's expectations.
Net gearing was 0.8 times in FY2017, compared with 0.7 times in the third quarter of FY2017. As of December 2017, Wilmar had total credit facilities of US$33.7 billion, of which 41 per cent was unutilised, reflecting the ample financial cushion available for the firm. We like its integrated business model and well-diversified operations, and the group expects to continue to achieve sustained growth.
Meanwhile, Wilmar has declared a final dividend of seven Singapore cents a share, bringing full-year dividends to 10 Singapore cents a share. It is 54 per cent higher than the 6.5 Singapore cents a share in FY2016 and represents a dividend payout of about 39 per cent for FY2017. The stock has corrected by 8.5 per cent since our last report and we see sufficient upside to upgrade our rating to "buy", based on an unchanged fair value of S$3.51.
Sunningdale Tech I Add
Feb 23 close: S$1.97
Target price: S$2.82
Fourth-quarter FY2017 revenue rose by 1.6 per cent year on year, driven by growth across all business segments except the consumer/IT segment. Sunningdale reported net profit of S$7.7 million in the fourth quarter of FY2017. Excluding the foreign exchange losses of S$2.8 million, the Q4 FY2017 adjusted net profit was S$10.6 million.
Sunningdale guides that business sentiment remains subdued and the overall muted economic landscape continues to present it with challenges across its global manufacturing operations.
We moderate our gross margin assumption, leading to a 0.6 per cent decrease in core FY2018 earnings per share forecast. However, our FY2019 forecast earnings per share rises by 1.1 per cent owing to a lower estimate for other operating expenses. Our new target price is S$2.82, from S$2.79 previously.