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Wilmar shares recover, a little, after worst fall since 2012

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Wilmar International shares closed down, although well above intraday lows, as investors reacted to the ag trading giant's warning of a quarterly loss of $230m, after being wrong-footed by soybean and sugar market rallies.

Wilmar stock closed down 5.7% at Sing$3.16 in Singapore, wiping Sing$1.2bn from its stockmarket value, as investors reacted to the Singapore-based group's announcement that it was to report its first quarterly loss in at least 11 years.

The profit warning for the April-to-June quarter prompted a series of downgrades by analysts, at brokers ranging from Credit Suisse to CIMB.

Nonetheless, the shares closed well above the intraday low of Sing$2.96, a drop of nearly 12%, and representing the biggest drop in Wilmar stock in four years.

Broker reaction

Broker downgrades on Wednesday to hopes Wilmar stock included a cut by Credit Suisse to "underperform", from "neutral", in its outlook for the shares, with a reduction to Sing$3.10 from Sing$4.00 in the target price for the stock.

Broker ratings, price targets on Wilmar shares after profit warning, and (previous recommendation)

CIMB: reduce, (hold); Sing$3.23,(Sing$3.49)

Credit Suisse: underperform, (neutral); Sing$3.10,(Sing$4.00)

Goldman Sachs: neutral, (neutral); Sing$3.25,(Sing$3.25)

OCBC: sell, (hold); Sing$3.05,(Sing$3.34)

RHB: neutral, (buy); Sing$3.28,(Sing$3.99)

UOB Kay Hian: sell, (buy); Sing$3.05,(Sing$3.80)

Other downgrades included a reduction to "sell" from "hold" in OCBC's rating on Wilmar shares.

"To its credit, management did highlight [in May] that it would be facing 'challenging operating conditions' in the second quarter… citing higher feedstock prices, weaker crush margins and continued volatility in sugar prices," OCBC analyst Carey Wong said.

"But adjusting for the expected second-quarter loss, we pare our full year 2016 earnings estimate by 25% and full year 2017 by 5%.

"This in turn reduces our fair value [for Wilmar shares] from Sing$3.34 to Sing$3.05," the broker said, adding that it would "probably re-engage closer to Sing$2.85".


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