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Business Times
3 days ago
- Business
- Business Times
CGSI downgrades Wilmar, lowers price target amid heightened regulatory risk from Indonesia
[SINGAPORE] CGS International (CGSI) analyst Jacquelyn Yow downgraded Wilmar international from a 'hold' to a 'reduce' call in her Jul 18 report, with a lowered target price of S$2.70 from S$3.15. This is due to increasing uncertainties from Indonesia over land confiscation issues and ongoing investigations on alleged cases related to palm oil and rice, cited the analyst. Yow said: 'While the contribution from Indonesia's rice business to Wilmar's overall operating profit is likely not significant, recent developments in the country – including land confiscations and alleged corruption cases – have introduced increasing uncertainty for the group.' Earlier on Jul 15, Indonesia Business Post reported that the Indonesian National Police Food Task Force had launched an investigation into four major rice producers including Wilmar. This was over allegations of mislabelling, where lower-grade medium-grain rice was blended with premium rice and sold as higher quality. Wilmar also separately placed a security deposit of 11.8 trillion Indonesian rupiah (S$929 million) with the Attorney General's Office on Jun 17. This was linked to an ongoing legal appeal concerning alleged corruption in the issuance of palm oil export permits in 2022. 'We estimate that the potential financial impact of this to be nearly 2 per cent of its total net profit for FY2025, with the potential loss from the interest income amounting to US$729 million,' she said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up These regulatory issues in Indonesia, coupled with the rising volatility of commodity prices from the US tariffs and geopolitical tensions, are likely to continue to cast a shadow over Wilmar's near-term outlook, noted the analyst. 'As such, we cut our FY2025 to FY2027 forward core net profit by 0.4 to 12.5 per cent, factoring in lower margin for the feed and industrial segment due to lower soybean crushing margin, and a lower palm refining margin,' the analyst said. Q2 earnings expectations For the second quarter of 2025, CGSI's Yow expects the group to report a net profit of US$260 to US$270 million, down from US$343 million in the previous quarter, and year on year from US$278 million in Q2 2024. 'This is mainly driven by lower margin for its feed and industrial segment, due to a decline in soybean crushing margin despite better demand for soybean meal (in light of cheaper pricing than other animal feedstocks),' she said. In addition, the analyst said that the palm oil refining margin is likely to be lower in Q2 to Q4 FY2025, largely due to the revised Indonesian export levy which had resulted in lower refining margin. She also said the overall sales volume of its food product segment remained muted due to lower demand coupled with high promotional expenses, especially for the consumer product sub-segment, which may result in a lower margin. Her report in particular cited 'overall soft consumer consumption in China' as a factor affecting the sales volume in this segment. Increasing stake in AWL Agri Business Earlier on Jul 17, Wilmar had announced plans to acquire up to a 20 per cent stake in AWL Agri Business, formerly known as Adani Wilmar, from Adani Commodities, for 275 rupees per share. The transaction is part of the option agreement signed in December 2024, which had set a maximum price of 305 rupees per share, and came after Adani Commodities said it will exit the venture joint venture. While the final structure is under negotiation, Wilmar has stated it will acquire no less than 11 per cent and no more than 20 per cent of AWL's equity under this agreement. Yow said that the agreed purchase price of 275 rupees per share reflects an approximate 10 per cent discount to the previously capped price, indicating a more favourable valuation outcome for Wilmar. 'The deal strategically enhances Wilmar's control and long-term growth visibility in India, while also marking Adani Group's full exit from the fast-moving consumer goods space as it shifts focus towards infrastructure and energy. We believe the acquisition helps reinforce Wilmar's presence in India's fast-growing packaged food and edible oil market,' she wrote in her Jul 18 report. The analyst added that she view this as a 'prudent move' by the group to ensure continuity and support Wilmar's long-term ambitions in the market, given the difficulty of replicating a local partnership of Adani's scale. Following the transaction, Wilmar's effective stake in AWL would increase from 44 per cent to around 55 to 64 per cent, resulting in AWL becoming a subsidiary and enabling full financial consolidation. 'We remain neutral on the transaction, as the purchase price implies a FY2025 P/E of around 29 times – a premium to global peers – despite a relatively moderate earnings growth profile,' said the analyst. 'We reckon that the near-term operating conditions in India's consumer staples sector remain soft, which may limit upside in the immediate term,' she added. As the deal is still under negotiation, however, Yow does not expect any material impact on Wilmar's FY2025 forward financials. 'That said, based on AWL's FY2025 net profit of around US$145 million, full consolidation could potentially increase Wilmar's net profit by nearly 10 per cent moving forward,' she said.
Yahoo
03-06-2025
- Business
- Yahoo
Scientists launch $500 million effort to harness near-limitless energy under our feet: 'A significant step forward'
Indonesia and Japan announced the financial closing of a monumental $500 million project that will add a second unit to the Muara Laboh geothermal plant in West Sumatra, Indonesia, according to the Indonesia Business Post. Former Japanese Prime Minister Fumio Kishida, who serves as special envoy for the current prime minister, met with Indonesian President Prabowo Subianto. Together, they sealed the deal and accentuated the strength of the nations' bilateral cooperation. "This 88-megawatt geothermal project in Solok, West Sumatra, marks a concrete showcase of our commitment under the Asia Zero Emission Community," Indonesia's coordinating minister for the economy, Airlangga Hartarto, told the Indonesia Business Post. "It is a significant step forward in our energy transition efforts." Kishida created AZEC as prime minister to help decarbonize Asia with other countries in the Association of Southeast Asian Nations and create, per The Associated Press, "a new, huge decarbonization market in Asia that will attract global capital." Similar initiatives are underway in the U.S. in Colorado and Texas, among other states. Although there are some concerns about geothermal energy, on the whole, it provides many environmental and human benefits. It is a renewable resource that reduces planet-warming emissions, air pollution, and dependence on fossil fuels. The geothermal energy industry also creates jobs. According to the U.S. Bureau of Labor Statistics, "Opportunities should arise for workers in a wide variety of occupations with different education and training requirements. … As the demand for clean energy grows, jobs in geothermal energy will be a small but growing potential source of new employment opportunities." In other words, it is both financially and environmentally profitable for society to move away from dirty energy and toward newer, cleaner alternatives. One of the best ways for consumers to compound the economic and environmental benefits of initiatives like these is to transition their homes to solar power. This move can bring energy costs down to or near $0. Should we be harnessing the ocean to power our homes? Absolutely Leave it be It depends I'm not sure Click your choice to see results and speak your mind. Companies such as EnergySage can help. It provides a free service that makes it easy to compare quotes from vetted local installers and save up to $10,000 on solar installation, allowing everyday homeowners to harness the power of clean energy. Voicing gratitude for the kinship and shared vision of the two nations, Hartarto said to Antara News: "Indonesia deeply appreciates Japan's commitment to sustainable development. This progress reflects both countries' efforts to foster mutually beneficial economic cooperation and shared prosperity." Join our free newsletter for good news and useful tips, and don't miss this cool list of easy ways to help yourself while helping the planet.
