Wilmar share price swim or sink in 2023?
How will Wilmar share price unravel in 2023? In my previous article, I wrote that Wilmar share price fell from the sky and lost its way in 2022 following a series of unfortunate events. The roller coaster form of Wilmar share price had left many investors befuddled. After all, the Group had been consistently churning out good financial results in recent years. In this article, I will share my insights on the outlook of Wilmar share price in 2023.
First thing first. I must clarify that Wilmar is one of my favourite SGX stocks, so my views may be biased. In 2020, I had invested in Wilmar and exited at a profit of $2,700 in early 2021. My lowest entry of 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 point. Despite so, I would caution that due to the volatility of Wilmar share price, this stock is really not for the faint-hearted.
There are a few driving factors behind the volatility of Wilmar share price, and they are largely attributed to the core business in Indonesia – palm oil plantations. Wilmar is one of the world’s largest oil palm plantation owners with a total planted area of 232,053 hectares (ha) as at 31 December 2020, of which about 65% is in Indonesia. This means that foreign currency translation (Indonesia rupiah) and crude palm oil (CPO) prices play a major part in influencing Wilmar share price.
As Wilmar reports its financial result in USD dollar, the surge in strength of US dollar in 2022 had a macroeconomic impact on Wilmar. With rising interest rates, the US dollar has surged significantly in 2022. Due to this, investors must be horrified to learn that the Group incurred an eye-popping US$931 million of losses due to foreign currency translation. This caused the total comprehensive income for 2HFY2022 to decline to US$420 million, vis-à-vis the US$1.05 billion of total comprehensive income recorded for 2HFY2021.
The foreign currency volatility is beyond the control of management. Even though the Group has hedged against such risk, there is only so much the Group can hedge as it is extremely challenging to predict accurately the exchange rate on daily basis.
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In my opinion, the foreign exchange risk could be a key concern for institutional investors. This could be the reason for institutional investors giving the counter the cold shoulder. In February and March 2022, the strong buying in from institutional investors had sent Wilmar to the Top Ten Institutional Net Buy Lists. Since the Fed started its first interest rate hike in March 2022, Wilmar had not featured in the list until December 2022 in which there was net buying of $21.3 million on Wilmar shares.
The buying in from the big boys led to a mini rally of Wilmar share price in December 2022. The counter rose from $3.50 in October 2022 to a high of $4.20 in December 2022. Can Wilmar share price sustain the rally in 2023?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 ambushed by CPO
For the past one year, the lowest point for Wilmar share price was $3.50 in October 2022. In my opinion, the plunge in Wilmar share price was largely due to the stunning [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]Lifetime Membership
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