Chinese New Year Special Offer! In my last article on Wilmar share price (SGX: F34) in September 2021, I wrote that this counter could face huge turmoil in the short-term. Indeed, Wilmar share price continued to disappoint for the rest of 2021. The counter ended the year on $4.140, a far cry from the high of $5.57 seen in February 2021. Will Wilmar share price return to form in 2022?
The dismal form of Wilmar share price is indeed puzzling as the Group has been racking in explosive profits in FY2021. Thus, investors must be wondering what on earth could have caused the rupture of Wilmar share price. In this article, I will share with readers the compelling reason for the downtrend of Wilmar share price, which is linked to the business fundamentals. In the latter part of the article, I will also share my analysis on why Wilmar share price may hit $5.70 in February 2022.
In 2020, I invested in Wilmar and exited at a profit of $2,700 in early 2021. My lowest entry for Wilmar share price was $4.84 and I exited at $5.20. While I did not exit at the highest point of $5.60, I have no regrets selling my Wilmar stocks. In life, you can never sell at the highest price. I am happy as long as I made decent profits. Although I am not vested in this counter any more, I am still bullish about Wilmar share price in the long-run because of the business strategies undertaken by the management.
The key reason for my exit in early 2021 was due to the financial result for FY2021. In my analysis, I saw that the net cash flows from operating activities for six months ended 31 December 2020 was a negative US$1.52 billion vis-à-vis the positive US$944 million recorded in the previous year. Cash flow from operating activities is important for a company because this metric would impact the free cash flow. So, when the cash outflow was so huge, alarm bells set off in my head and I liquidated my position for a small profit.
Indeed, my thesis was proven right as Wilmar share price plunged following the release of Q1FY2021 business update. In that update, the Group recorded a stunning drop of 95% for its cash flow from operating activities. Subsequently, cash outflow worsened to US$1.39 billion in 1HFY2021. However, in 9MFY2021 result, there was a cash inflow of US$670 million.
Apparently, the big boys shared the same concern. According to data extracted from SGX, for 4 consecutive months (April to July 2021), Wilmar shares had been on the top ten institutional net sell list. The heavy sell-offs by the big boys sent Wilmar share price straight to the bottom of the cliff. In April, $33.8 million of Wilmar shares had been net sold. Then in May, $42.8 million of Wilmar shares been net sold. June saw about $60 million of shares been net sold by the big boys. In July, a whopping $83 million of shares were net sold.
Now why is net cash from operating activities so important and what is its relation to Wilmar share price if you may ask? In this article, I will share my insights on this financial metric and how it could shape Wilmar share price in the coming months. In fact, the upcoming 4th quarter financial result will provide vital clue on the direction of Wilmar share price in FY2022. And the India market plays a major role on this.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. As of now, I am not vested in this counter. In view of the volatility of Wilmar share price, investors must exercise caution in trading this counter.
Wilmar share price at crucial point
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