Listing could be sought in Hong Kong but idea is still in early stages, says CEO
By Goh Eng Yeow 14 May 2009 Plantation giant Wilmar International is making a bold bid to hive off its China operations as a separately listed company despite the depressed market for new listings globally.
Wilmar chairman and chief executive officer Kuok Khoon Hong said the new listed firm could be worth as much as US$15 billion (S$22 billion).
This is based on the unit’s profit of US$600 million and using a yardstick valuing companies in the sector with a price-earnings (PE) ratio of 25.
That would make it almost as valuable as Wilmar itself, which is worth $28 billion after its share price jumped 24 cents to $4.40 yesterday on news of the listing proposal.
Wilmar also unveiled its first-quarter results before yesterday’s opening bell and posted a better-than-expected 11 per cent jump in earnings to US$380 million on improved profit margins.
But revenues fell 31 per cent to US$4.96 billion due to lower selling prices of agricultural products such as oil seeds and grains.
Earnings per share was up 11 per cent to 5.95 US cents, while net asset value per share rose 3.3 per cent to US$1.55.
The revelation of the China listing proposal stole the limelight at the results briefing, with analysts peppering Mr. Kuok with questions.
He acknowledged that the idea was still very much in the preliminary stage, as he had met investment bankers only last week.
But Mr. Kuok was clearly consumed with the idea as he gave a run-down on the proposal.
He clearly preferred the Shanghai bourse as firms listed there are valued at 40 times PE or more. However, it would take four to five years before a listing can be made in Shanghai due to the extensive restructuring that Wilmar would have to undertake.
So the company might have to settle for Hong Kong, where a listing could be completed within six months, even though firms are valued at a far lower 25 times PE.
Mr. Kuok said: ‘If we achieve 25 times PE, and we sell 20 to 30 per cent, we can get US$3 billion to US$4 billion.’
It also made strategic sense for Wilmar to have greater Chinese participation in its mainland operations given its increasingly large presence in China’s food sector.
‘At the right price, we don’t mind selling 51 per cent of our China operations so that it could be deemed to be locally owned in China,’ said Mr. Kuok.
Being regarded as a mainland firm would also remove some of the restrictions Wilmar faces in expanding its operations in China.
‘Today, even though we are controlled by overseas Chinese, they consider us not to be like local Chinese. They look at us the way Singaporeans look at these Chinese sportsmen who became Singaporeans,’ he said.
He also stressed that Wilmar would not delist from the Singapore Exchange, where it is the second most valuable firm after SingTel.
He explained that the China operations are embedded in Wilmar’s plantations business, but the Hong Kong market is willing to pay a big premium for such consumer products businesses in China because they see the potential there.
By contrast, Singapore investors understand the palm oil business better than Hong Kong investors.
Some traders doubt that Wilmar can carry out its ambitious plan.
‘Mr. Kuok may want to raise US$3 billion or US$4 billion in Hong Kong, but there may just be no appetite for such a big offering there,’ one remisier noted.
Last week, Hong Kong hosted the listing of mainland aluminium products maker, China Zhongwang, which raised US$1.3 billion, making it the biggest initial public offering (IPO) in the world so far this year.
But attesting to the still moribund state of the Hong Kong IPO market, China Zhongwang closed 5 per cent below its issue price of HK$7 at HK$6.68 on Monday.
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Wilmar may hive off China ops as new firm
Listing could be sought in Hong Kong but idea is still in early stages, says CEO
By Goh Eng Yeow
14 May 2009
Plantation giant Wilmar International is making a bold bid to hive off its China operations as a separately listed company despite the depressed market for new listings globally.
Wilmar chairman and chief executive officer Kuok Khoon Hong said the new listed firm could be worth as much as US$15 billion (S$22 billion).
This is based on the unit’s profit of US$600 million and using a yardstick valuing companies in the sector with a price-earnings (PE) ratio of 25.
That would make it almost as valuable as Wilmar itself, which is worth $28 billion after its share price jumped 24 cents to $4.40 yesterday on news of the listing proposal.
Wilmar also unveiled its first-quarter results before yesterday’s opening bell and posted a better-than-expected 11 per cent jump in earnings to US$380 million on improved profit margins.
But revenues fell 31 per cent to US$4.96 billion due to lower selling prices of agricultural products such as oil seeds and grains.
Earnings per share was up 11 per cent to 5.95 US cents, while net asset value per share rose 3.3 per cent to US$1.55.
The revelation of the China listing proposal stole the limelight at the results briefing, with analysts peppering Mr. Kuok with questions.
He acknowledged that the idea was still very much in the preliminary stage, as he had met investment bankers only last week.
But Mr. Kuok was clearly consumed with the idea as he gave a run-down on the proposal.
He clearly preferred the Shanghai bourse as firms listed there are valued at 40 times PE or more. However, it would take four to five years before a listing can be made in Shanghai due to the extensive restructuring that Wilmar would have to undertake.
So the company might have to settle for Hong Kong, where a listing could be completed within six months, even though firms are valued at a far lower 25 times PE.
Mr. Kuok said: ‘If we achieve 25 times PE, and we sell 20 to 30 per cent, we can get US$3 billion to US$4 billion.’
It also made strategic sense for Wilmar to have greater Chinese participation in its mainland operations given its increasingly large presence in China’s food sector.
‘At the right price, we don’t mind selling 51 per cent of our China operations so that it could be deemed to be locally owned in China,’ said Mr. Kuok.
Being regarded as a mainland firm would also remove some of the restrictions Wilmar faces in expanding its operations in China.
‘Today, even though we are controlled by overseas Chinese, they consider us not to be like local Chinese. They look at us the way Singaporeans look at these Chinese sportsmen who became Singaporeans,’ he said.
He also stressed that Wilmar would not delist from the Singapore Exchange, where it is the second most valuable firm after SingTel.
He explained that the China operations are embedded in Wilmar’s plantations business, but the Hong Kong market is willing to pay a big premium for such consumer products businesses in China because they see the potential there.
By contrast, Singapore investors understand the palm oil business better than Hong Kong investors.
Some traders doubt that Wilmar can carry out its ambitious plan.
‘Mr. Kuok may want to raise US$3 billion or US$4 billion in Hong Kong, but there may just be no appetite for such a big offering there,’ one remisier noted.
Last week, Hong Kong hosted the listing of mainland aluminium products maker, China Zhongwang, which raised US$1.3 billion, making it the biggest initial public offering (IPO) in the world so far this year.
But attesting to the still moribund state of the Hong Kong IPO market, China Zhongwang closed 5 per cent below its issue price of HK$7 at HK$6.68 on Monday.
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