Would Benjamin Graham Buy Wilmar International?

As one of Asia’s leading agribusiness group and one of the largest components of the Straits Times Index (SGX: F34) it is perhaps easy to assume that Wilmar International (SGX: F34) might not hold much in the way of value.

But jumping to conclusions without first digging into the numbers could lead to missed opportunities.

Wilmar is big. It boasts over 450 manufacturing plants, an extensive distribution network covering China, India, Indonesia and some 50 other countries. It has a workforce of around 90,000.

However, one statistic that Wilmar might be less proud of is being named the world’s least environmentally-friendly company by US magazine Newsweek back in 2012. Such a damaging reputation could cause some of the more environmentally-conscious investors to shun its stock. In fact the Government Pension Fund of Norway, the largest stock owner in Europe, excluded Wilmar from its portfolio in 2013 for precisely that reason.

Whilst making assumptions, you might also think that a large company such as Wilmar with steady top-line revenue and an earnings yield of around 7% would pay a healthy dividend. But the dividend yield of 2.5% is not that generous compared to other blue chips. More importantly, it is no better than the risk-free rate of return on the 10-year US Treasury.

So Wilmar does not seem terribly exciting in terms of the rewards on offer. But could it be a safe investment?

Wilmar currently trades at 14 times earnings – that is about the same as the market average. It is also valued at the sum total of its net assets. In other words, its Price-to-Book ratio is one. These measures suggest that Wilmar is not too expensive. But neither is there much in the way of a decent margin of safety.

At present it would, therefore, seem that Wilmar is fairly priced. Its current ratio is 1.35 and it has a healthy balance sheet. That might appeal to some investors – just not value hunters for now.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Adam Kuo doesn’t own shares in any companies mentioned.