Wilmar International

[weii]

It seems to me that Wilmar has some resemblance to Amazon and Alibaba, in that it had over many years, built a sprawling network of inter-supporting businesses and assets, which would be difficult to replicate. 

Even though Wilmar's network would not have the kind of powerful virtuous cycle effect that Amazon and Alibaba enjoy, nonetheless a large, well-oiled, vertically-integrated business, complemented with a trading operation, should be valuable.  

While ROE is not exciting (just below 10%), there could be substantial value hiding within. How can or what would lead to this value manifesting -- that is something I have to study further.

What baffles me is Wilmar's current focus on building central kitchens in China - described as Wilmar's most important project. How big can the market for ready-to-eat / ready-to-cook meals be when hot food is easily available at lower prices? From what I see in SG, supermarkets and 7-11s are not selling huge volumes of RTE/RTC meals.

At PE of 12X, Wilmar looks attractive.

Wilmar and the National University of Singapore (NUS) have established a new joint research laboratory to conduct cutting-edge clinical nutrition and synthetic biology research to create healthier food products as well as to devise green production technologies for industrial enzymes and biochemicals.

Wilmar’s research and development (R&D) activities support our business operations by improving manufacturing processes, ensuring the consistency and enhancing the quality of existing products as well as developing new innovative products. Our R&D work is carried out by around 600 scientists and researchers in various locations worldwide, including Singapore, China, Indonesia, India, Malaysia, Russia, Australia and New Zealand. In line with the Group’s integrated approach, our R&D teams engage in cross-border collaborations as well as with external organisations to share knowledge and resources to enhance the collective R&D effort.

Wilmar and the National University of Singapore (NUS) have established a joint research laboratory in 2018 to conduct cutting-edge clinical nutrition and synthetic biology research to create healthier food products as well as to devise green production technologies for industrial enzymes and biochemicals.

https://www.wilmar-international.com/our...evelopment
https://wil-nus.sg/

According to UOB Kay Hian, the high rental cost, labour cost and difficulty in retaining chefs have driven the demand for central kitchens. Wilmar is in good position as it has land to construct integrated complexes. Wilmar will open up its central kitchen to rent to other players. Partners can also leverage on Wilmar’s central buying of raw materials to reduce cost, and also to leverage on Wilmar’s strength in culinary school.

[weijian]

What baffles me is Wilmar's current focus on building central kitchens in China - described as Wilmar's most important project. How big can the market for ready-to-eat / ready-to-cook meals be when hot food is easily available at lower prices? From what I see in SG, supermarkets and 7-11s are not selling huge volumes of RTE/RTC meals.

At PE of 12X, Wilmar looks attractive.

There are emerging trends in US where DoorDash is developing virtual brands and ghost kitchens. Wilmar might be doing something similar in time to come?

https://www.valuebuddies.com/thread-10549.html

That said, always good for Mgt to expand horizontally and try out new stuff.

[Choon]

What baffles me is Wilmar's current focus on building central kitchens in China - described as Wilmar's most important project. How big can the market for ready-to-eat / ready-to-cook meals be when hot food is easily available at lower prices? From what I see in SG, supermarkets and 7-11s are not selling huge volumes of RTE/RTC meals.

At PE of 12X, Wilmar looks attractive.

There are emerging trends in US where DoorDash is developing virtual brands and ghost kitchens. Wilmar might be doing something similar in time to come?

https://www.valuebuddies.com/thread-10549.html

That said, always good for Mgt to expand horizontally and try out new stuff.

On further thought, perhaps management see central kitchen and the manufacturing and sale of consumer processed goods - for example progression from selling Arawana-branded flour to selling Arawana-branded noodles - as providing the next phase of growth for the group.  

Unfortunately cereal is not a Chinese staple, otherwise it would have been a sizable product market for the Arawana brand.

[Choon]

I have been trying to understand and piece together the various pieces of Wilmar's business.

My understanding thus far is that Wilmar's business revolves around four main agri-commodity categories: palm oil, oil grains, grains, and sugar, and that Wilmar's largest business segments are: Food Products and Feed & Industrial Products.

If anyone can enlighten, does Wilmar subject the entire volume of agri-commodities that it purchases through internal processing (milling/refine/crushing/manufacturing), for eventual sale to 3rd-parties through its Food Products and Feed & Industrial Products segments?

Or does Wilmar also buy and sell agri-commodities without any processing / value-add (i.e. pure trading)?

[wj1984]

Just to add a little on commodities companies processing their core products. During my course of work we do sell some machines to produce consumer products which these companies purchase.

Lets talk about palm oil producers, such as mewah, intercontinental oil & fats etc. (i know wilmar does not have a consumer production plant in malaysia but they have many labs with pilot consumer production machines to allow their end user to test the suitability of their palm oil but they do have plants for edible oil production), one of the consumer products is condensed / evaporated milk which uses quite a bit of palm oil & sugar (used to be tax free in malaysia).

The reason they want to venture to consumer products is because of higher margins instead of just selling palm oil (last few years CPO prices were at a record low). But with all consumer products there are alot of other cost such as marketing, provisions for product recall etc.

[retired1again]

Doesn't condensed/ evaporated milk make from cow's milk instead of palm oil?

[Choon]

What baffles me is Wilmar's current focus on building central kitchens in China - described as Wilmar's most important project. How big can the market for ready-to-eat / ready-to-cook meals be when hot food is easily available at lower prices? From what I see in SG, supermarkets and 7-11s are not selling huge volumes of RTE/RTC meals.

At PE of 12X, Wilmar looks attractive.

There are emerging trends in US where DoorDash is developing virtual brands and ghost kitchens. Wilmar might be doing something similar in time to come?

https://www.valuebuddies.com/thread-10549.html

That said, always good for Mgt to expand horizontally and try out new stuff.

On further thought, perhaps management see central kitchen and the manufacturing and sale of consumer processed goods - for example progression from selling Arawana-branded flour to selling Arawana-branded noodles - as providing the next phase of growth for the group.  

Unfortunately cereal is not a Chinese staple, otherwise it would have been a sizable product market for the Arawana brand.

Interestingly and coincidentally, chanced upon this in 2012AR:

"Leveraging on our manufacturing and distribution network in China, the Group
formed a 50:50 joint venture with Kellogg Company for the manufacture, sale and
distribution of breakfast cereals and savoury snacks in China. The collaboration will
allow both partners to maximise marketing and manufacturing synergies to develop
premium quality breakfast cereals and snack products for the Chinese consumer."

[wj1984]

Doesn't condensed/ evaporated milk make from cow's milk instead of palm oil?

i roughly know the formula; 5% (if its condensed milk, less if its creamer), 20 - 30% palm oil, 40 - 50% sugar, whey powder, stabilizer / emulsifiers and there you go you have your favorite teh or kopi ping!

[retired1again]

Hi wj1984,

Thanks for sharing this info.
It makes good business sense since the company since 60% to 80% of ingredients are available within the group.

[wj1984]

Hi wj1984,

Thanks for sharing this info.
It makes good business sense since the company since 60% to 80% of ingredients are available within the group.

No problem! yes it does when commodities prices are low. But i'm not sure if commodities prices are high is it worth to venture into manufacturing business because there are a lot of other cost & risk; marketing, product recall etc etc.