Wilmar International Is Poised For Long-Term Success

| About: Wilmar International, (WLMIF)


WLMIF is Increasingly diversifying revenue through value added downstream processing and sugar.

Sugar will be a major revenue driver.

However, soybean crushing margins will continue to by cyclical.

I last wrote an article on Wilmar International (OTCPK:WLMIF) late last year and have accumulated its shares over the past 2 years.

What I like about this company is evident. I wrote last year that I was bullish on agriculture commodities based on a view that inflation is poised to come back and companies in this sector have not necessarily reflected this future trend. One such company is WLMIF.

Here is a snapshot of WLMIF's Valuation Measures from Yahoo! Finance.

With a Forward P/E of 14.17x and PEG Ratio of 1.35x, investors may not readily look at this company as a long-term investment target. Simply put, it is not cheap.

What I like though, is that WLMIF is progressively changing its business model. Here's an example based on PBT by Segments in 1Q 2014.

1Q2014 Revenue By Segments Source: Wilmar International 1Q2014 Results Presentation

1Q 2010 PBT

Source: Wilmar international 1Q2010 Results Presentation

Two evident trends can be seen by this simple comparison. Wilmar's sugar operations have become a significant segment and the "Oilseeds & grains" segment is very important to the company as its fluctuations between gains and losses (mainly cyclical) has been a drag on the company.

Source: WLMIF 4Q2013 Corporate Presentation

On an annualized basis, sugar now contributes to about 7% of the company's profits. The Consumer Products segment is another major contributor (about 12%).

Source: WLMIF 4Q2010 Corporate Presentation

The impact of volatility in WLMIF's Oilseeds & grains segment will continue to weigh on the company's stock performance. However, over time, we should see stronger profit and revenue drivers as the company continues its diversification and downstream expansion.

Disclosure: The author is long WLMIF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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