Initiated a small position in an Agricultural Conglomerate in SRS

I nibbled 1,500 shares of Wilmar International Limited (SGX:F34) in my SRS ultra long-term portfolio today.

Wilmar Internation Limited is an agricultural conglomerate that encompasses the entire value chain of the agricultural commodity business, from cultivation and milling of palm oil and sugarcane, to processing, branding and distribution of a wide range of edible products in consumer, medium and bulk packaging, animal feeds and industrial agri-products such as oleochemicals and biodiesel.

It owns more than 500 manufacturing plants and an extensive distribution network covering China, Indonesia, India and some 50 countries and regions. Being the largest raw sugar producer and refiner, it is also the largest manufacturer of bread, spreads and sauces in Australia. In Indonesia, it is the largest producer of branded consumer pack oils. In Russia, it is the largest manufacturer of consumer pack margarine and mayonnaisse.

This is a good enticing piece of business to own. Hence when its share price retraced in recent days from $4.50 to $4.30ish, I have been monitoring and intend to add it into my ultra long-term portfolio.

The opportunity came today when my order got filled.

The company has target prices ranging from $5.80 to $6.67 set by the various broker houses after announcing earnings of US568.7 million for 3Q FY2021, up 6% year-on-year. The analysts predicted that Wilmar could potentially achieve a record year in earnings of up to US$1.7 billion for FY2021 due to improving economy in China and high commodity prices.

The company has also been occasionally buying back its own shares ranging from the highs of $5.38 to $4.33 which was made yesterday. This indicate the confidence by the company that its own share price is below its intrinsic value.

As my investment portfolios are heavy on Reits and property development businesses, it is great to add this piece of agriculture business for diversification. Despite having growth potential, Wilmar offers an attractive dividend yield of around 4.7% based on 20.5 cents paid on in 2021 at share price of $4.35 at time of writing. It also has a track record of paying dividends for the past 14 years.

There are definitely downside risks for investing in such an extensive global agriculture business. High Capex operating costs, geographical and regulation risks are inevitable for operations all over the world. Its ROE is also relatively low due to low profit margins. Nevertheless, I am optimistic for Wilmar and believe that the reward to risk ratio is relatively high and could be rewarding in the long-term.

Thank you for reading. Stay safe and be strong as always. 

With love & peace, 

Qiongster