MARKET PULSE: Wilmar, Tiger Airways (22 May 2012)

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.87

MARKET PULSE: Wilmar, Tiger Airways

22 May 2012

KEY IDEA Wilmar: Paring FV to S$3.87 Wilmar International Limited's (WIL) stock price took a big hit after posting a dismal set of 1Q12 results on 10 May. From the previous day close of S$4.70, the stock closed 9% lower on the day after its 1Q12 results announcement. And since then, the stock has fallen by another 13% to hit a recent low of S$3.71. We note that the stock has also fallen 37% from its 52-week high of S$5.99. At its current price, we note that WIL is trading around 12.2x consensus FY12 EPS, or around one standard deviation below its 5-year mean. During the previous subprime financial crisis, WIL's PER fell to a low of 9.7x, or about -1.5x SD below its historical mean. Given that the market is still adopting a more risk adverse approach, we lower our fair value estimate from S$4.30 to S$3.87 (based on 13.5x PER versus 15x previously). Maintain HOLD as valuations are not demanding. (Carey Wong) MORE REPORTS Tiger Airways: Recovering; upgrade to HOLD FY12 was a difficult year for Tiger Airways' (TGR) after the Australian aviation authorities imposed restrictions on its Australian operations and further aggravated by high jet fuel prices. However, TGR is now on the road to recovery. TGR is scheduled to begin operations in Sydney from Jul 2012, allowing it to ramp up its operations and optimise the utilisation of its aircraft. Its regional JVs are also taking shape, which should allow Tiger Singapore to return to gradual capacity expansion. However, if Mandala and SEAir fail to take on the earmarked aircraft, TGR's core operations will again be saddled with having too many aircraft. We increase our fair value estimate of TGR from S$0.60/share to S$0.67/share, so as to reflect its improving operations, and upgrade it to HOLD. (Eric Teo)

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