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Thursday, September 24, 2020 – 3:24 pm
Wilmar International SHARES traded strongly on Thursday after it announced that the proposed listing of its 99.99 percent-owned Chinese subsidiary Yihai Kerry Arawana (YKA) will have an issue price of 25.7 yuan per share. and is expected to raise 13.9 billion yuan (S $ 2.81 billion).
The accountant was the most traded share by value on the Singapore Stock Exchange on Thursday. The agri-food giant had called for a suspension of operations on Wednesday morning, which it lifted on Thursday before the market opened.
Its shares started the day with a high of S $ 4,425, before falling to an intraday low of S $ 4.24 at 10:06 am. The stock regained some momentum to trade at S $ 4.37 as of 3:20 pm, down S $ 0.01 or 0.2 percent from the close of the previous day. Almost 20 million shares worth S $ 85.9 million changed hands.
Wilmar said Thursday morning that the issue price is calculated at a price-to-earnings (P / E) multiple of 31.12 times based on YKA’s fiscal 2019 recurring net income and expanded share capital after the initial public offering (IPO).
He added that the average P / E multiple of other publicly traded companies in the same industry as YKA for the immediate prior month was 41.86 times.
The Chinese subsidiary will issue new shares worth approximately 10 percent of its expanded share capital under the IPO, which means that Wilmar will retain majority control.
Analysts have been optimistic that YKA’s initial public offering (IPO) unlocks value for Wilmar shareholders.
OCBC Investment Research wrote in a note on Sept. 17 that Wilmar’s stock price could potentially trade in the range of S $ 4.44 to S $ 6.50 after the IPO, assuming a P / E ratio of 14. times for Wilmar’s ex-YKA business, to 15 percent. conglomerate discount percent.
The research team said the listing will unlock value for Wilmar’s shareholders and further grow Wilmar’s business in China. OCBC expects the conglomerate’s core business performance to remain resilient in the second half of this year, despite the pandemic.
OCBC, which called Wilmar a “purchase” with a fair value of S $ 5.40 as of September 17, noted that a portion of the proceeds from the IPO will also be distributed to shareholders as a special dividend after listing.
Meanwhile, in a Sept. 16 note, CGS-CIMB analysts said the market could be underestimating YKA’s potential value. This, coupled with Wilmar’s special dividend potential and favorable earnings outlook, prompted analysts to reiterate their “add” option and the S $ 5.53 price target on the motherboard-listed counter.
CGS-CIMB also said that the listing would help unlock the value of Wilmar’s operations in China and catalyze its share price.
Last month, RHB wrote that it expects YKA to return to trading at a leading P / E of at least 35 times after the IPO, in line with the average of its peers, and estimated the special post-IPO dividend to be S $ 0.10 per share.
However, Tellimer’s head of consumer capital research, Nirgunan Tiruchelvam, advised investors earlier this month to be patient as the market could be overvaluing Wilmar based on the Chinese unit’s listing expectations. .
“The IPO is by no means a certainty,” Tiruchelvam told The Business Times. “The fear is that there is too much at stake in China’s IPO.”
He noted that some IPOs had failed or disappointed investors in terms of valuations.
Wilmar said Thursday that while the proposed listing is scheduled to take place in mid-October, it is subject to prevailing market conditions and there is no certainty that it will proceed.
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