Wilmar

DBS VICKERS on Dec 28

IN an announcement issued last Friday, Wilmar International said its wholly owned subsidiary, WCA Pte Ltd (WPL), together with Kerry Properties (China) Limited (KPCL) and Shangri-La China Limited (SACL), entered into a termination agreement with the Laobian Branch of Yingkou City Land Resources Bureau (the Termination Agreement) on Dec 23, 2011, pursuant to which: 1) The notices to confirm the JV Parties' winning bid for the land use rights for the Laobian project sites will be terminated; 2) 271.57 million yuan deposit paid by the JV parties for the Laobian project sites bid will be returned to the joint venture company owned by WPL, KPCL and SACL (in the proportion of 35 per cent, 40 per cent and 25 per cent respectively); and 3) The JV Parties and the JV company will be relieved from all liabilities and obligations for the land use rights bid.

The JV company will be wound up after all matters relating to the termination of the acquisition of the Laobian project sites have been settled. As part of the winding-up process, all assets of the JV company will be distributed to the JV parties according to their respective interests in the JV company.
The JV parties have a project in the same city located at Bayuquan, Yingkou City (details of which are set out in Wilmar's announcement dated Dec 21, 2010).
Comments: No financial outlay and contribution from Wilmar's China property projects have been included in our forecasts. Hence, this latest announcement has no impact on our numbers. The deposit was returned, as we understand the winning bid was non-binding. However, this raised questions whether the local government can unilaterally do the same for Wilmar's other JVs in Bayuquan district; and whether the termination will have implications for the group's future opportunities in the Liaoning province. While we are awaiting answers from Wilmar, our recommendation and TP on the stock remains unchanged.
HOLD