Wilmar

Wilmar's business activities include oil palm cultivation, oilseed crushing, edible oils refining, sugar milling and refining, manufacturing of consumer products, specialty fats, olechemicals, biodiesel and fertilisers as well as flour and rice milling. It is an integrated agribusiness model encompassing the entire value chain in agricultural commodity business. It has over 500 manufacturing plants and an extensive distribution networks covering China, India, Indonesia and 50 other countries. 

A quick overview on the Income Statements, Gross Profits have been positive and stable at around USD 4,000 million level. Interest expense in 2016 has decreased, the trend over the years show a reduction. However, EPS has decreased over the years.

In the Cash Flow Statements, investment in CAPEX is decreasing over the years. Free Cash Flow is consistent. There is a need to wait for the investment in CAPEX to be reduced, the company will be able to increase the earning power. CAPEX as a percentage of sales has seen the ratio decreasing over the years. Net Cash Flow from operating activities in 9M2017 is USD 1,559 million compared to USD 1,248 million, producing a positive free cash flow of USD 1,232 million. Inventories reduced to USD 6 billion in 9M17 from FY16 USD 7 billion, lower stockpile following end of festive season especially in China.

The dividend growth over the years are consistent. If based on $0.07/share, the yield will be 2.25% based on S$3.10 purchased share price. Payout ratio has been increasing over the years.

Debt to Equity ratio in Sep 30, 2017 has decreased to 0.72 from 0.81 as at Dec 31, 2016. Adjusted D/E has reduced to 0.30 for Sep 30, 2017 compared to 0.35 for Dec 31, 2016. 

NAV per share as at 30 Sep 2017 is USD 2.43, I am buying at USD 2.29 which is lower than NAV. 

The key moat of Wilmar is economies of scale of the business. It has total planted area of 237,212 hectares. The entire supply and logistics chain enables cost savings which other competitors cannot compete with. This is the moat I like about Wilmar.

I do not like the cyclical part of agri-commodities. Especially the business will be affected by weather and geopolitical reason.