Initiated a position in Wilmar International
Updated: Feb 27, 2020
Woke up this morning and got a notification that Wilmar’s share price had dropped hit the levels I was hoping for.
Wilmar Intl has been a company which I have been wanting to invest over the past few years. It is in the agribusiness sector, being a very large player in oil palm and sugar.
What interested me most about Wilmar Intl wasn’t about what it dabbles in, but that it owns the entire supply chain. When a company does that, it essentially controls the entire business from agriculture to refining to selling. This means that the company has the ability to:
As everything is done in-house, there is a huge benefit where costs are controlled, as there is no need to ‘waste’ money in engaging a third party for refining or distribution.
Consistency in quality is also achieved as you are now able to control the quality of the processes, and there is no longer a need to be reliant on the work etiquette of your external partners
This to me is one of the biggest benefits. If, for instance, the prices for oil palms go down, and prices are depressed, a company which dabbles only in upstream processes will feel the burn as their earnings will be affected. But in Wilmar’s case, depressed oil palm prices would mean that their downstream operations would benefit as they are essentially getting the same quantity of oil palm for a lower price. In a certain sense, there’s a form of hedging going on. As such, earnings are usually stable.
Once I had established that Wilmar Intl. was indeed a company that was worth tracking, the share price had already gone up. What was a low $3.10 per share went up to more than $3.70. As such, it was playing a patience game.
Over the past few months, Wilmar’s share prices had been dropping slowly.
So, it dropped again today. But buy or not?
If you’d look at its financial statistics (highlighted in red below) you’d see that the NAV is currently at $3.2799. That means that if the share price is anything below that, you’ll be getting the entire business, with a portion of it being ‘free’. Being more towards the value-investing spectrum, this was something to look out for.
What was the closing price today? $3.20.
I placed an order at $3.25 and this got filled about 1 hour later.
Since it’s a Friday, I suspect that prices may return back to normal on Monday. If it drops further, I’ll just accumulate more.
Prospects Mr. Kuok Khoon Hong, Chairman and CEO, said, “While the Group may face short term challenges, we remain very optimistic about the tremendous growth prospects of our various businesses and will continue with our expansion plans, especially in China, India and Indonesia.”