We retain our OW rating on Wilmar International(WIL) stock, with a new target price of S$4.00/share– implying 39% upside potential. At our TP, WIL wouldtrade at 2009/10e P/E of 15x/11x, relative to itsmid-cycle P/E of 13x and 2010-12e EPS CAGR of 28%.

Upgrading WIL’s 2008-10e EPS estimates by anaverage of 43% – our numbers, on average, are 13%higher than consensus. We are more confident onWIL’s profit outlook given its strong earnings in 3Q08,when the industry experienced a sharp downturn in softcommodity prices. We attribute this to WIL’s superiormarket intelligence – due to its dominant position in themid-stream edible oil industry – allowing it to bettermanage its commodity price risk relative to its peers.

We expect WIL’s dominant market position in theglobal palm oil and China soybean industries tofurther strengthen. In our view, lower soft commodityprices and tight banking liquidity could drive out marginalplayers from the industry, benefiting WIL, which couldinorganically expand its operations at any point alongthe edible oil value chain. We expect WIL to impressthe market with firm profit margins, good earningsgrowth and further market share gains goingforward.

Key risks: 1) Protracted stabilization of CPO price at thecurrent levels; 2) lower-than-expected global CPO andsoybean production volume; 3) significant slowdown inChina economy; 4) lower-than-expected decline inoperating costs; and 5) realization of inorganic growthopportunities.