May 12, 2017 / 10:19 AM / in 2 months

Singapore's Wilmar pursues China prospects with renewed listing plan

SINGAPORE, May 12 (Reuters) - Singapore's Wilmar International Ltd, which is considering spinning off its China business, is looking to list it in Shanghai to boost its profile on the mainland and potentially pave the way for deals.

China is Wilmar's biggest market, accounting for nearly 50 percent of 2016 revenues of $41.4 billion for one of the world's largest edible oil processors. Its annual revenues from China have risen about 50 percent since 2009.

Wilmar said in Thursday's earnings statement it was carrying out an "internal restructuring" of those operations. It confirmed on Friday that that would mean reviving a listing plan first aired in 2009, but swapping the venue to Shanghai from Hong Kong.

"The timing is favourable as the Chinese government is encouraging foreign companies to list there," a spokeswoman said. Proceeds could be used to "expand the business" but the company did not comment on listing size or specifics, saying any offering proposal would be at least 18 months away.

Wilmar's move revives its China listing plans nearly eight years after it shelved a blueprint for a roughly $3 billion listing of the Chinese unit in Hong Kong in 2009, blaming volatile markets. (reut.rs/2pBRmtj)

Choosing the mainland this time should also help boost its valuation, bankers said - though some questioned whether as a foreign entity it could encounter difficulties.

"In Singapore the PE ratio is not as good as China, China is about 30 percent more. It is not possible to take money out of China and invest in Singapore stock exchange," one source with knowledge of the matter said.

The source also said Wilmar was following its market - it supplies 45 percent of cooking oil sold in the Chinese retail market. And it could mean easier deals in a growing market.

In its annual report, Wilmar had said that the recent lifting of restrictions in China on oilseeds and grains processing on foreign companies will smoothen its expansion there.

Testing the Waters?

Wilmar is the top edible oils refiner as well as speciality fats and oleochemicals manufacturer in China, where it is also among the largest flour and rice millers. It also sells edible oils, grains and noodles under its brands.

Some analysts questioned Wilmar's need to make the statement on what is still an early stage plan in China, when there had been no speculation, exchange request or share movement.

One analyst at a European investment bank said in a report the announcement could help test appetite and establish a minimum valuation for the China listing.

Wilmar does not require the money from the listing but needs the business expansion opportunities it will bring, the analyst said, adding it may again explore forming a combination with a state-owned agricultural company to spur growth.

Angeline Chin, a Malaysia-based analyst with TA Securities, said the potential IPO "definitely will be bigger than 2009" and that besides raising money for expansion, a listing in the key market will also boost its reputation there.

Wilmar currently has a market capitalisation of about $16.9 billion. Its business in China consists of several entities, including joint ventures and associates. Wilmar said it was evaluating the listing of all its businesses in China.

Since shelving its 2009 plans, Wilmar has added to businesses such as rice and flour milling in China, as well as more of its branded consumer products.

The company's shares closed up 9.6 percent at S$3.76 on Friday, while the broader market ended 0.5 percent lower. (Reporting by Aradhana Aravindan; Additional reporting by Elzio Barreto in Hong Kong and Naveen Thukral in Singapore; Editing by Clara Ferreira Marques and Muralikumar Anantharaman)

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