Singapore Company Focus

Wilmar International Refer to important disclosures at the end of this report

Bloomberg: WIL SP | Reuters: WLIL.SI

DBS Group Research . Equity

24 Feb 2014

BUY S$3.37 STI : 3,099.93

Advancing steadily

Price Target : 12 months S$ 3.92 (Prev S$ 3.83) Reason for Report : 4Q13 results, revisions in forecasts/TP Potential Catalyst: Consistent earnings delivery DBSV vs Consensus: Lower FY14F and FY15F earnings due to lower CPO price forecasts Analyst Ben SANTOSO +65 6682 3707 [email protected]

Oilseeds & Grains gain vigour. Wilmar reported 4Q13 earnings of US$353m (-12% y-o-y; -10% q-o-q), in line with our/consensus estimates. The sequential drop was mainly attributable to an 84% q-o-q fall in Sugar pretax, given earlier recognition of milling profits in the previous quarter. This was partly offset by a 115% sequential jump in Oilseeds & Grains pretax to US$116m and a 28% q-o-q rise in Consumer pretax to US$75m – both above expectations. A final DPS of S$0.055 was declared (payable 15 May14).

Price Relative S$

Relative Index

7.7

217

7.2

197

6.7

177

6.2

157

5.7

137

5.2

117

4.7 4.2

97

3.7

77 57

3.2 2.7 Feb-10

Feb-11

Feb-12

Wilmar International (LHS)

Feb-13

37 Feb-14

Relative STI INDEX (RHS)

Forecasts and Valuation FY Dec (US$ m)

Revenue EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) Net Pft (ex. BA gains) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth (%) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (S cts): Other Broker Recs:

2013A

2014F

2015F

2016F

44,085 2,396 1,775 1,319 1,288 1,325 26.1 25.5 5 8 26.1 5.2 297.1 12.9 13.2 20.7 12.8 1.5 1.1 0.8 9.0

49,082 2,878 1,901 1,416 1,416 1,416 28.0 28.0 7 10 28.0 5.6 319.7 12.0 12.0 11.7 10.8 1.7 1.1 0.8 9.1

53,711 3,181 1,956 1,451 1,451 1,451 28.7 28.7 2 2 28.7 5.7 342.8 11.7 11.7 16.7 10.0 1.7 1.0 0.7 8.7

59,276 3,476 2,077 1,535 1,535 1,535 30.4 30.4 6 6 30.4 6.1 367.3 11.1 11.1 17.8 9.4 1.8 0.9 0.7 8.6

2 29.2 B: 18

(2) 31.8 S: 3

(3) 34.9 H: 6

ICB Industry : Consumer Goods ICB Sector: Food Producers Principal Business: Wilmar is an integrated agribusiness group with one of the largest oil palm plantation land bank in the world, significant share in China’s consumer edible oil market and large merchandising and processing capacities in Asia’s expanding economies.

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

www.dbsvickers.com ed: TH / sa:JC

• 4Q13 core earnings in line with our/consensus expectations. S$0.055 final DPS declared • Drop in Sugar pretax was offset by much stronger Oilseeds & Grains, Plantations, Consumer pretax • TP raised to S$3.92 on reduced capex. Acquisition of Shree Renuka not yet imputed, pending analysis • Lower expected soybean/soybean oil prices in 2H14 should boost Wilmar’s M&P pretax. BUY call reiterated for 17% potential return

FY14F/FY15F earnings tweaked by +2%/-2%; as we imputed FY13 numbers; increased Oilseeds & Grains pretax margins, and lowered the group’s forecast capex over the next several years (guided at around US$1bn this year). The revisions raised our DCF estimate on the counter to S$3.92 (WACC 6.9%, Rf 3.0%, ERP 7.7%, Beta 1.1, TG 3%) – offering 17% potential upside (excluding 2% dividend yield). Strong outlook. We expect Wilmar’s Oilseeds & Grains to continue to perform well for the rest of the year, as lower forecast soybean prices should boost the group’s Oilseeds & Grains M&P and Consumer margins. We expect Sugar contribution to improve slightly on additional contribution from Cosumar; although this segment should continue to book seasonally lower contribution in 1H14. Still undervalued. We believe investments in Oleochemicals, Rice & Flour, Plantations (mainly in Africa) and its associates in recent years – all in high-growth economies – should continue to boost the group’s long-term earnings. We also believe Wilmar’s significant share in global supply and demand volumes affords them visibility and better risk management. We reiterate our BUY call on the counter. At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders Kuok Brothers Sdn Bhd (%) Archer-Daniels (%) Longhlin Asia Ltd (%) Free Float (%) Avg. Daily Vol.(‘000)

6,399 21,565 / 17,010 18.3 16.4 5.3 60.0 6,003

Company Focus Wilmar International

Highlights

Minor tweaks to forecasts

Sequentially higher margins

For the full year, Wilmar netted core earnings of US$1,303m (+5% y-o-y), in line with our forecast of US$1,312m. The growth was mostly driven by seasonally higher volumes – except for sugar – which offset lower ASP. The group’s EBIT and pretax margins were 4.2% and 4.4%, lower than 4.5% and 4.8% in 3Q13 and 4.3% and 4.7% in 4Q12 respectively. The weakness resulted from the sequential drop in Sugar segment’s profit contribution.

Wilmar’s 4Q13 core earnings declined 10% q-o-q to US$353m (-12% y-o-y) – in line with our and consensus forecasts. Including non-operating items, 4Q13 earnings fell 11% q-o-q and 23% y-o-y to US$369m (inclusive of US$9m of biological asset gains/losses). The sequential weakness was expected, as the group had recognised most of its Sugar profit contribution in 3Q13. As a result, Sugar segment pretax fell by 87% q-o-q and 82% y-o-y to US$19m. This was partly offset by: 1.

2.

3.

Higher-than-expected Oilseeds & Grains M&P pretax of US$116m (+150% y-o-y; +115% q-o-q) vs. US$44m expected. The strength was due to supply tightness in soybean meal caused by delayed arrival of imported soybeans, amid strong demand ahead of an early Chinese New Year. Better-than-expected Consumer segment pretax of US$75m (+84% y-o-y; +28% q-o-q) vs. US$59m expected. Demand in China was also strong ahead of Chinese New Year, in addition to stronger contributions from India, Indonesia and Vietnam. Stronger Plantations pretax contribution of US$87m (25% y-o-y; +50% q-o-q) vs. US$64m forecast, due to recovery in CPO prices; even though volumes were lower than anticipated.

Palm & Lauric M&P pretax contribution of US$201m (+3% yo-y; -5% q-o-q) was slightly lower than US$217m expected; as weaker refining margins were offset by increased contributions from high value-added downstream products. Associates’ income contribution settled at US$18m (-21% y-oy; +115% q-o-q), in line with our forecast; given initial contribution from newly acquired Consumar and higher contribution from India associates. On per MT basis, the group also reported stronger-thanexpected 4Q13 pretax margins: 1. Palm & Lauric 4Q13 M&P pretax: US$30 (flat y-o-y; 13% q-o-q) vs. 3Q13 and 4Q12 pretax/MT of US$35 and US$30 respectively 2. Oilseeds & Grains 4Q13 M&P pretax US$20 (+128% y-oy; +108% q-o-q) vs. 3Q13 and 4Q12 pretax/MT of US$10 and US$9 respectively 3. Consumer 4Q13 pretax US$50 (+46% y-o-y; +29% q-oq) vs. 3Q13 and 4Q12 pretax/MT of US$39 and US$34 respectively

Page 2

Imputing 4Q13 results, we adjusted our forecasts for both Merchandising and Processing (M&P) pretax margins – but kept our volume forecasts unchanged. For the Oilseeds & Grains M&P, we raised forecast pretax margin by 23% to US$9/MT to account for the strongerthan-expected soybean meal demand in China. Our pretax margin forecast remains significantly lower than US$20/MT booked in 4Q13. We expect post-Chinese New Year demand to drop; while soybean arrivals gather pace in 1H14. For the Palm & Lauric M&P, we reduced pretax margin forecast by 8-18% for the next three years, in view of rising refining capacity coming on stream in Indonesia. We believe this would limit the group’s ability to defend its 4Q13 margin of US$30/MT. We understand Indonesia’s refining capacity has now expanded to between 36m MT and 37m MT now; and is expected to increase further towards 41m MT by the end of FY14 (from c.25m MT at the end of FY12). Despite this, we are encouraged by the group’s announcement that it had won the entire 1.1m MT biodiesel awarded in the second Pertamina tender. We understand the benchmarked price given by Pertamina was equivalent to MOPS (Mean of Platts Singapore); and that further discussions are underway to secure additional volumes with a more favourable biodiesel pricing formula. We raised FY14F-16F Sugar contribution by 6-9%, after accounting for higher M&P volume; despite continued weakness in sugar prices. Despite these adjustments, FY14 Sugar pretax is still expected to decline by 5% y-o-y. The group’s milling margins should remain weak this year on weak sugar prices and higher costs. We have yet to impute contribution from Shree Renuka acquisition; as the impact should remain immaterial. As more details are made available, we will be re-adjusting our forecasts. We also raised the group’s FY14F-16F Consumer pretax margin by 13%, as we believe declining feedstock costs

Company Focus Wilmar International

should remain favourable for the segment. We understand Rice & Flour sub-segment’s contribution in China had remained negligible in 4Q13. We expect the group’s flour milling expansion in Indonesia to do better. We reduced our capex forecasts in FY14/15/16 by 16%/17%/17% respectively, to c.US$1.3 bn p.a. – relatively higher than management’s guidance of c.US$1bn, as we believe the group will continue to pursue more acquisitions. All –in, we tweaked the group’s FY14F/15F/16F earnings by +2%/-2%/-3% respectively. The lower profit expectations in FY15F and FY16F arose from higher expected interest expense from higher rates. The earnings revisions and lower capex forecasts have nudged up our DCF valuation to S$3.92 (WACC 6.9%, Rf 3.0%, Rm 10.7%, Beta 1.1, TG 3%).

The group estimates that biodiesel demand in Indonesia would increase to 3.5m MT this year v.s c.1m MT in FY13. This figure is higher than our forecast of 1.3m MT (for transportation alone) and 2.2m MT (including power generation). We are maintaining our forecast for now; given delays in Pertamina’s awards due to its unfavourable pricing formula; while delays in PLN’s awards also imply lower consumption.

Higher Plantations contribution going forward We kept FY14F FFB yield unchanged from our previous forecast but reduced FY15F FFB yield by 3%, given disposal of some mature estates earlier this year. FY14F and FY15F Plantations segment pretax were hence tweaked to US$352m (+31% y-o-y) and US$405m (+15% y-o-y). The yo-y recovery represents higher forecast CPO prices.

Crushing margin to sequentially soften We expect soybean crush margins in China to likely soften in 1Q14, as supply constraints ease. We also expect lower meal demand post-Chinese New Year. While there were concerns over the re-emergence of bird flu; we understand soybean meal demand continues to be driven by the hog industry, due to pent-up demand, tight supply and lack of alternative meals.

Weak refining margin offset by stronger downstream Sequentially, Palm & Lauric M&P pretax was adversely affected by lower refining margins, although this was offset by increased contributions from high value-added downstream products (i.e. oleochemicals, specialty fats and biodiesel).

Page 3

Balance sheet remains strong As at end Dec13, Wilmar had a cash balance of US$11,735m – up from US$12,411m at the end of Sep13. Gross debts have also increased to US$26.2bn from US$26.0bn at the end of the previous quarter. The group’s net gearing was reported at 83% (including other deposits with financial institutions); although accounting for liquid working capital and cash deposit at financial institutions; this ratio was reported at 36% - flat from end Sep13. At the end of Dec13, Wilmar’s four-quarter rolling cash conversion cycle was calculated at 99 days – up from 86 days at end Sep13, given significant sequential rise in inventories. In addition to seasonally higher volume processed; we also believe Wilmar had secured its soybean feedstock at lower prices in 4Q13.

Company Focus Wilmar International

4Q13 results summary and comments 4Q12 11,623.5 -10,608.1 1,015.4

3Q13 11,836.6 -10,768.8 1,067.8

4Q13 11,621.6 -10,605.0 1,016.6

% chg y-o -y 0.0 0.0 0.1

S&D cost Admin exp Others Other operating expenses Other operating income Net gains fr. chg bio assets EBI T

-420.8 -168.1 -3.8 -592.8 45.4 28.8 496.9

-409.9 -167.5 -26.1 -603.6 70.9 0.0 535.2

-427.1 -164.7 -35.8 -627.6 105.4 -8.6 485.8

1.5 -2.0 839.1 5.9 132.4 NM -2.2

4.2 Higher selling expenses ahead of early CNY -1.7 37.1 4.0 48.7 Mainly FX gains NM -9.2

Depreciation Amortisation Depreciation & amort. EBI T DA

149.2 0.1 149.3 646.2

152.6 0.1 152.6 687.8

160.0 0.1 160.0 645.9

7.2 -52.7 7.2 0.0

4.9 19.6 4.9 -6.1

Finance income Finance cost Associates Exceptional gains (losses) Pro fit be fo re t a x

96.9 -123.6 22.2 55.8 548.2

125.1 -130.9 8.2 28.9 566.5

143.7 -159.3 17.6 22.3 510.2

48.4 28.9 -20.9 -60.0 -6.9

14.9 21.7 114.9 -22.8 -9.9

71.2

-8.4

Qua rt e rly re sult s (US$ m ) Sa les Cost of goods sold Gro ss pro fit

Income tax

tax rate Profit for the year Profit attributable to: S ha re ho lde rs Ne t pro fit e x. BA gains Non controlling interest % of net profit Co re pro fit Gross margin, % EBIT margin, % EBITDA margin, % Pretax margin, % Net margin, %

% chg q-o -q -1.8 -1.5 -4.8

-67.1

-125.3

-114.8

12.2%

22.1%

22.5%

481.1

441.2

395.4

-17.8

-10.4

476.8 453.7 4.4

416.0 416.0 25.2

369.1 375.9 26.4

-22.6 -17.1 NM

-11.3 -9.6 NM

-12.0

-9.7

0.9%

5.7%

6.7%

401.0

390.9

352.9

8.7 4.3 5.6 4.7 4.1

9.0 4.5 5.8 4.8 3.5

8.7 4.2 5.6 4.4 3.2

Co m m ent s Except Sugar, higher volumes offset lower ASP Sequentially lower commodity prices Strong Oilseeds & Grains offset by Sugar

Higher structured deposit placed, off balance sheet Higher effective interest rates Initial contribution from Cosumar, higher from India Lower investment gains

Source: Company, DBS Bank Target Price & Ratings History

3.89

S$

1:

Cl o s i n g Ta rg e t Pri c e Pri c e 20 Feb 13 3.74 3.81

2:

25 Feb 13

3.54

3.88

Hold

3: 4:

12 Mar 13 08 Apr 13

3.34 3.31

3.88 3.72

Hold Hold

5:

09 May 13

3.42

3.72

Hold

6:

10 May 13

3.42

3.72

Hold

7:

30 May 13

3.31

3.72

Hold

8:

11 Jun 13

3.16

3.72

Hold

9: 10:

01 Jul 13 11 Jul 13

3.13 3.13

3.48 3.48

Buy Buy

11:

07 Aug 13

3.16

3.46

Hold

12:

16 Aug 13

3.09

3.46

Hold

13:

27 Aug 13

3.10

3.46

Hold

14:

11 Oct 13

3.26

3.53

Hold

15:

11 Nov 13

3.45

3.83

Buy

16: 17:

11 Dec 13 13 Jan 14

3.38 3.31

3.83 3.83

Buy Buy

S.No . 3.69

1 2

3.49

6 4

3.29

3

3.09

2.89 Feb-13

16

5

14 7 8

10 9

Jun-13

15 17

12 11 13 Oct-13

Feb-14

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Bank

Page 4

Da te

R a ti n g Hold

Company Focus Wilmar International

Quarterly operating statistics Segme nt vo lume s ('000 MT) Palm & Lauric M&P

4Q11 5,344

1Q12 5,169

2Q12 5,623

3Q12 5,849

4Q12 6,474

1Q13 5,531

2Q13 6,194

3Q13 6,104

4Q13 6,677

y-o-y growth Sugar Milling Sugar M&P To t al Sugar y-o-y growth Plant at io n FFB CPO PK Mature hectarage FFB yield (MT/ha)

-7.6% 6,150 29.7% 11,494 9.2% 1,178 13.8% 1,334.0 1,124.0 2,458 NM

20.4% 4,408 25.6% 9,577 22.8% 1,206 7.5% 85.0 495.0 580 32.1%

16.6% 4,588 -0.7% 10,211 8.1% 897 7.2% 257.0 1,039.0 1,296 57.9%

0.1% 5,244 -7.3% 11,093 -3.6% 1,316 4.4% 1,289.0 1,670.0 2,959 10.9%

21.1% 5,311 -13.6% 11,785 2.5% 1,189 0.9% 1,213.0 1,020.0 2,233 -9.2%

7.0% 4,666 5.9% 10,197 6.5% 1,325 9.9% 97.0 1,210.0 1,307 125.3%

10.2% 4,498 -2.0% 10,692 4.7% 1,094 22.0% 436.0 1,691.0 2,127 64.1%

4.4% 5,621 7.2% 11,725 5.7% 1,505 14.4% 1,879.0 1,546.0 3,425 15.7%

3.1% 5,834 9.8% 12,511 6.2% 1,499 26.1% 668.0 1,265.0 1,933 -13.4%

1,117,060 487,275 115,691 216,623 5.2

945,760 406,686 96,769 213,569 4.4

938,396 416,465 96,457 212,056 4.4

1,071,403 516,407 122,269 217,313 4.9

1,254,931 569,772 134,489 222,370 5.6

986,841 437,827 103,286 225,580 4.4

924,256 395,428 89,121 225,165 4.1

967,288 473,833 108,295 216,686 4.5

1,162,400 541,060 122,779 215,257 5.4

Segme nt revenues (US $ m) Palm & Lauric M&P

4Q11 5,475.0

1Q12 5,431.1

2Q12 6,007.6

3Q12 5,780.1

4Q12 5,528.7

1Q13 4,542.7

2Q13 5,093.4

3Q13 4,908.0

4Q13 5,381.9

1.0%

-2.2% 419.4 -9.3% 407.7 663.9 1,071.6 21.6% 613.0 -30.2% -1,320.6 11,623.5 0.9%

-16.4% 3,090.4 14.9% 7,633.1 -6.0% 2,037.3 7.7% 348.8 -19.6% 54.9 713.6 768.6 68.1% 608.8 -24.9% -1,196.0 10,200.5 -2.6%

-15.2% 2,999.0 -2.8% 8,092.4 -11.0% 1,508.0 9.2% 315.0 -24.3% 176.7 887.0 1,063.7 26.5% 660.9 -1.5% -1,213.9 10,426.3 -5.4%

-15.1% 3,783.6 5.1% 8,691.6 -7.4% 2,068.4 -0.2% 337.6 -26.4% 639.8 745.4 1,385.1 8.9% 653.7 3.3% -1,299.7 11,836.6 -4.2%

10.8% 430.7 2.7% 195.5 618.4 813.9 -24.0% 743.5 21.3% -1,448.8 11,621.6 0.0%

y-o-y growth Oilseeds & Grains M&P

y-o-y growth To t al M&P

y-o-y growth Consumer products

y-o-y growth Oilseeds & Grains M&P

y-o-y growth To t al M&P revenue s

y-o-y growth Consumer products

y-o-y growth Plantation & palm oil mills

y-o-y growth Sugar milling Sugar M&P To t al Sugar y-o-y growth Others y-o-y growth Elimination To t al revenues y-o-y growth Segment PBT (US$ m) Palm & lauric M&P Oilseeds & grains M&P To t al M&P Consumer products Plantation & palm oil mills Sugar milling Sugar M&P To t al Sugar Others PBT Associates Unallocated income/costs To t al PBT Palm & lauric PBT/MT (US$) Oilseeds & grains PBT/MT (US$) Consumer PBT/MT (US$) Sugar PBT/MT (US$)

Source: Company, DBS Bank

Page 5

6.2%

6.6%

3.6%

3,826.7

2,689.6

3,086.5

14.4%

9.5%

3.3%

1,791.4

1,890.9

1,380.5

26.8% 462.2 -7.1% 405.0 476.5 881.5 NM 878.1 58.0% -1,796.2 11,518.7 26.7%

9.3% 433.8 9.3% 50.5 406.8 457.3 24.2% 810.3 43.5% -1,242.1 10,470.9 9.8%

8.0% 416.1 -20.7% 112.4 728.4 840.9 28.8% 670.7 3.3% -1,382.5 11,019.7 4.3%

-11.8% 3,601.5 2.7% 9,381.6 -6.7% 2,072.0 5.2% 458.9 0.0% 506.9 765.1 1,272.0 -2.6% 633.1 -19.3% -1,468.5 12,349.3 -5.7%

4Q11 108.6 1.7 110.3 33.2 113.4 101.9 -3.5 98.4 24.7 42.0 -8.2 413.6

1Q12 234.9 -52.5 182.4 50.3 98.7 -58.0 10.1 -47.9 91.5 21.6 -8.2 388.5

2Q12 160.1 -40.0 120.1 18.0 79.2 -79.1 18.9 -60.3 -34.6 30.7 -4.0 149.1

3Q12 181.2 60.3 241.5 48.4 116.6 75.6 25.8 101.3 22.4 48.5 -10.0 568.8

4Q12 195.0 46.2 241.2 40.6 116.2 67.8 38.9 106.7 30.9 22.2 -9.6 548.2

1Q13 218.7 47.2 265.9 56.5 72.1 -55.7 42.1 -13.6 -13.6 53.2 -3.7 416.8

2Q13 224.5 15.3 239.8 29.9 52.7 -52.1 21.8 -30.3 -33.2 24.9 -1.8 281.9

3Q13 211.9 53.7 265.6 58.3 57.9 127.5 23.7 151.2 26.8 8.2 -1.5 566.5

4Q13 200.6 115.6 316.2 74.7 87.0 -1.1 20.4 19.3 -1.3 17.6 -3.2 510.2

20.3 0.3 28.1 40.0

45.5 -11.9 41.7 -82.6

28.5 -8.7 20.0 -46.5

31.0 11.5 36.8 34.2

30.1 8.7 34.1 47.8

39.5 10.1 42.7 -10.4

36.2 3.4 27.3 -14.3

34.7 9.5 38.7 44.2

30.0 19.8 49.8 10.0

28.6%

15.6%

2.6%

9,301.7

8,120.7

9,094.1

3,558.6

-7.0% 9,087.3

-2.3% 1,752.8

-2.7% 3,758.8

5.6% 9,140.7

0.6% 1,941.6

Company Focus Wilmar International

Key Assumptions FY Dec

2012A

2013A

2014F

2015F

2016F

2,865.9 0.7 33.4 4,608.0 255,648.0

2,360.0 11.2 33.8 5,423.0 241,048.0

2,570.0 9.1 30.6 6,807.9 246,048.0

2,670.0 9.1 28.2 7,699.1 251,048.0

2,810.0 9.2 25.9 8,516.6 256,048.0

2012A

2013A

2014F

2015F

2016F

35,684 1,728 7,096 2,727

33,558 1,433 7,555 2,893

36,277 1,639 8,914 3,038

39,835 1,810 9,884 3,184

43,516 1,993 11,032 3,337

Elimination Total EBIT (US$ m) M&P Plantations Consumer products Others

(1,772) 45,463

(1,354) 44,085

(787) 49,082

(1,001) 53,711

(602) 59,276

910 411 182 90

1,100 270 222 94

1,222 360 320 99

1,333 419 385 104

1,372 498 434 109

Unallocated costs Total EBIT Margins (%) M&P Plantations Consumer products Others

(32) 1,561

(93) 1,593

(110) 1,890

(123) 2,117

(133) 2,280

2.5 23.8 2.6 3.3

3.3 18.8 2.9 3.3

3.4 22.0 3.6 3.3

3.3 23.1 3.9 3.3

3.2 25.0 3.9 3.3

3.4

3.6

3.9

3.9

3.8

CPO price (RM/MT) Oilseeds & grains pretax Palm & lauric pretax Consumer products vol. Oil palm planted area Segmental Breakdown FY Dec

Revenues (US$ m) M&P Plantations Consumer products Others

Total

Revenue Cost of Goods Sold Gross Profit Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. Net Pft (ex. BA gains) EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x)

Source: Company, DBS Bank

Page 6

Recovery from low base, thanks to strong soybean meal demand in China

Margins Trend

Income Statement (US$ m) FY Dec

Raised Oilseeds & Grains pretax margin to US$9/MT from US$7/MT

2012A

2013A

2014F

2015F

2016F

5.0%

45,463 (41,572) 3,891 (2,246) 1,645 0 123 (178) 64 1,655 (334) (65) 0 1,255 1,191 1,235 2,311

44,085 (40,360) 3,725 (2,066) 1,659 0 104 (18) 31 1,775 (385) (72) 0 1,319 1,288 1,325 2,396

49,082 (44,700) 4,382 (2,311) 2,070 0 99 (269) 0 1,901 (402) (83) 0 1,416 1,416 1,416 2,878

53,711 (48,869) 4,842 (2,545) 2,297 0 99 (440) 0 1,956 (414) (92) 0 1,451 1,451 1,451 3,181

59,276 (53,935) 5,342 (2,828) 2,513 0 97 (533) 0 2,077 (439) (103) 0 1,535 1,535 1,535 3,476

4.5%

1.7 (20.9) (27.1) (21.6)

(3.0) 3.7 0.9 5.1

11.3 20.1 24.8 7.3

9.4 10.6 11.0 2.5

10.4 9.3 9.4 5.8

8.6 3.6 2.8 9.1 3.1 3.5 20.7 9.3

8.4 3.8 3.0 9.0 3.0 3.2 20.0 90.3

8.9 4.2 2.9 9.1 3.1 3.8 20.0 7.7

9.0 4.3 2.7 8.7 3.1 4.2 20.0 5.2

9.0 4.2 2.6 8.6 3.1 4.4 20.0 4.7

4.0% 3.5% 3.0% 2.5% 2.0% 2012A

2013F

Operating Margin %

2014F

2015F

2016F

Net Income Margin %

Tweaked FY14F-16F earnings by -3%+2% on higher Oilseeds & Grains M&P contribution, higher Consumer margins, offset by lower Palm & Lauric M&P contributions

Company Focus Wilmar International

Quarterly / Interim Income Statement (US$ m) FY Dec

4Q2012

1Q2013

Revenue Trend 2Q2013

3Q2013

4Q2013

14,000

30% 25%

12,000

Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%)

(1.8) (4.7) (9.2) (11.3)

8.7 4.3 4.1

9.3 3.6 3.1

6.7 2.6 2.1

9.0 4.5 3.5

8.7 4.2 3.2

2012A

2013A

2014F

2015F

2016F

8,924 1,658 7,519 10,313 7,137 6,115 254 41,920

9,337 2,035 7,418 13,315 7,221 7,066 240 46,632

9,847 2,135 7,625 11,042 7,951 7,338 240 46,177

10,324 2,234 7,732 11,235 8,693 8,030 240 48,486

10,746 2,331 7,838 11,540 9,594 8,862 240 51,151

Balance Sheet (US$ m) FY Dec

Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Shareholder’s Equity Minority Interests Total Cap. & Liab. Non-Cash Wkg. Capital Net Cash/(Debt) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X)

Source: Company, DBS Bank

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17,740 3,279 394 4,505 807 14,346 849 41,920

19,392 3,200 600 6,804 750 15,005 882 46,632

19,637 3,498 662 4,480 787 16,148 965 46,177

20,414 3,728 667 4,480 826 17,312 1,057 48,486

21,403 4,012 678 4,480 868 18,550 1,160 51,151

9,834 (11,933) 51.3 29.3 64.1 1.1 1.1 0.8 0.8 0.8 9.1 1.8

10,727 (12,881) 54.6 29.8 66.0 1.0 1.2 0.9 0.8 0.9 4.1 2.0

11,369 (13,075) 53.6 27.8 62.9 1.1 1.1 0.8 0.8 0.8 5.3 2.1

12,567 (13,660) 52.2 27.4 63.2 1.1 1.1 0.8 0.7 0.8 5.3 2.1

14,005 (14,343) 52.0 26.6 62.9 1.2 1.2 0.8 0.7 0.8 5.2 2.2

0% -5%

4,000

-10% 2,000

-15%

0

-20%

Revenue

3Q2013

13.5 57.5 101.1 90.4

5%

2Q2013

2.2 (22.6) (28.5) (30.7)

10%

6,000

1Q2013

(12.2) (14.6) (25.1) (33.9)

15%

8,000

4Q2012

(5.9) (11.8) (13.1) 17.5

20% 10,000

3Q2012

11,622 (10,605) 1,017 (531) 486 0 18 (16) 22 510 (115) (26) 369 347 663

2Q2012

11,837 (10,769) 1,068 (533) 535 0 8 (6) 29 566 (125) (25) 416 387 696

4Q2011

10,426 (9,731) 695 (429) 266 0 25 12 (21) 282 (55) (8) 219 240 442

1Q2012

10,201 (9,255) 945 (573) 372 0 53 (9) 1 417 (89) (12) 315 315 571

3Q2011

11,623 (10,608) 1,015 (519) 497 0 22 (27) 56 548 (67) (4) 477 421 668

2Q2011

Revenue Cost of Goods Sold Gross Profit Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA

Revenue Growth % (QoQ)

Core profit was US$353m (-12% yo-y; -10% q-o-q)

Asset Breakdown (2014) Debtors 20.7%

Net Fixed Assets 32.5%

Assocs'/JVs 5.8%

Inventory 23.1%

Bank, Cash and Liquid Assets 18.0%

As of end Sep13, net debt to equity excluding liquid working capital was 36%

Company Focus Wilmar International

Capital Expenditure Cash Flow Statement (US$ m) FY Dec

Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Opg CFPS (US cts.) Free CFPS (US cts.)

Source: Company, DBS Bank

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2012A

2013A

2014F

2015F

2016F

1,655 543 (334) (123) 639 (60) 2,320 (2,028) 0 0 0 (518) (2,546) (263) 1,356 7 (211) 890 0 664 26.2 4.6

1,775 633 (385) (104) (1,114) 14 820 (1,077) 0 0 0 143 (933) (281) 3,950 0 (383) 3,286 0 3,173 30.2 (4.0)

1,901 708 (402) (99) (704) 51 1,455 (1,285) 0 0 0 (110) (1,395) (272) (2,079) 0 (60) (2,411) 0 (2,352) 33.7 2.6

1,956 785 (414) (99) (1,203) (6) 1,019 (1,325) 0 0 0 (115) (1,440) (286) 778 0 39 531 0 110 34.7 (4.8)

2,077 866 (439) (97) (1,449) (1) 956 (1,350) 0 0 0 (121) (1,470) (298) 989 0 41 732 0 218 37.6 (6.1)

2000 1800 1600 1400 1200 1000 800 600 400 200 0 2012A

2013F

2014F

2015F

Capital Expenditure (-)

Assumed capex is higher than guidance of US$1.0bn this year

2016F

Company Focus Wilmar International DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) (b)

such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months.

ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published,the analyst and his/her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd., DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates has a proprietary position in Wilmar International recommended in this report as of 31 Dec 2013. 2.

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DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates may beneficially own a total of 1% of any class of common equity securities of the company mentioned as of 31 Dec 2013.

Company Focus Wilmar International

3.

Compensation for investment banking services: DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates may received compensation, within the past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking services from the company mentioned. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia

This report is not for distribution into Australia.

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This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission.

Indonesia

This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.

Malaysia

This report is distributed in Malaysia by HwangDBS Vickers Research Sdn Bhd ("HDBSVR"). Recipients of this report, received from HDBSVR are to contact the undersigned at 603-2711 2222 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer by DBS Bank Ltd, the preparer of this report found at the preceding page, recipients of this report are advised that HDBSVR, its holding company HwangDBS Investment Bank Berhad, their directors, employees and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. Wong Ming Tek Head of Research, HDBSVR

Singapore

This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand

This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United Kingdom

This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

Dubai

This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) rd having its office at PO Box 506538, 3 Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United States

Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations. It is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other jurisdictions

In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. DBS Bank Ltd. 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888 Company Regn. No. 196800306E

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