Olam International Ltd - Boosted by S$18m derivative gain

3Q09 core net profit of S$62.4m (+12%yoy) was in line with expectations, forming 34% of our FY09 core net profit estimates and 33% of consensus, boosted by an S$18m gain from derivatives, which according to management arose from ineffective hedges. Reported net profit of S$87m also includes an exceptional gain of S$25m from the CB buyback. Food product volumes grew between 8-16% while fibre and wood product sales volume dived 16%, and net contribution/tonne fell to S$89 from S$102. Core EPS estimates remain intact. Slowing price declines and price rebounds suggests that the worst is likely past. We lift our target price to S$1.20, based on 8.5x CY10 P/E (from S$0.97, 6.4x CY10 P/E). We assign a 15% discount to peer valuations due to Olam's high gearing, poor cashflow and smaller operations. Potential fund raising is one of our concerns. Maintain Underperform.

Wilmar International Ltd - Solid 1Q

Wilmar's 1Q09 results were above market and our expectations, making up 32% and 39% of the respective full-year estimates. The outperformance was made possible by better-than-expected pretax margins from its merchandising and processing as well as consumer products segments. The group is evaluating the feasibility of listing its China operations in Hong Kong or Shanghai to further unlock shareholders' value. We view this positively as it would help to lift valuations. We are raising our earnings forecasts for FY09-11 by 14-17% to account for the better-than-expected 1Q and higher processing margins for its downstream division. Our target price has been upgraded to S$5.30 from S$4.20 to account for our earnings upgrade and a higher forward P/E target of 18x (from 16x) in view of its plan to list its China operations in Hong Kong or Shanghai. Maintain Outperform.

Indofood Agri Resources - Key takeaways from roadshow

We recently organised a 1-day non-deal road show for Indofood Agri in Singapore, following the release of its 1Q09 results. Investors' response was strong, reflecting keen interest in the company and the plantation sector. Overall, we are more positive on IndoAgri following the roadshow for the following reasons: 1) the group is a prime beneficiary of the recent rise in CPO prices as it is selling most of its products on a spot basis; 2) it is set to enjoy lower fertiliser costs in 2Q09 ahead of most of its peers due to lower carried-forward stock; 3) efforts to improve its downstream sales and margins have yielded positive results; and 4) refinancing risks for its debt have eased in view of rising CPO prices and higher investor risk appetite. However, we are keeping our earnings forecasts intact due to unchanged CPO price assumptions. There is no change to our Trading Buy rating and target price of S$1.26, based on an unchanged forward P/E of 12x. We continue to like Indofood Agri for its strong management, attractive P/E valuation of only 10.4x against the sector's average of 12.8x and potential cost-savings from its merger with London Sumatra which should become more evident in the later part of this year.