This article first appeared in The Edge Financial Daily on July 5, 2018

KUALA LUMPUR: The long-awaited listing of Singapore-based Wilmar International Ltd’s business in China could face further setbacks if US-China trade tensions continue to depress the valuations of Chinese stocks, according to Bloomberg Intelligence.

“[Wilmar’s] price-earnings valuation discount to Chinese peers narrowed to 22% compared with the 34% to 42% range throughout 2017,” Bloomberg analyst Alvin Tai wrote in a note yesterday.

Although Wilmar could continue with the planned listing in the second half of 2019 and benefit from an eventual recovery in the Chinese stock market, the listing’s immediate boost to Wilmar would be more muted, Tai wrote.

Wilmar began efforts in May last year to list its Chinese operations on the Shanghai Stock Exchange.

It first mulled the plan in public as far back as 2009, which led to its first listing attempt in 2011, which was later put on hold due to poor valuation. Back in 2009, the listed entity was estimated to be worth between US$3 billion and US$4 billion.

Tai highlighted that its China unit contributes about half of Wilmar’s earnings. He also said Wilmar would shift to organic growth now that merger and acquisition (M&A) opportunities, which have supported its growth for the past 12 years, have dried up.

The most notable of the M&As was its merger with the Kuok Group’s agribusiness, said Tai. “That deal included China’s top-selling cooking oil brand Arawana, its biggest soybean crushing business, and oil palm plantations in Sabah, Malaysia, the closest source of palm oil to China. Wilmar also gained a foothold in the global sugar business by acquiring Australian producer Sucrogen in 2010,” he noted.

Wilmar is controlled by the Kuok Group via stakes held through Malaysian conglomerate PPB Group Bhd (18.5%); Malaysian business tycoon Tan Sri Robert Kuok Hock Nien also holds over 5% of the agribusiness conglomerate via the Kerry Group. Kuok’s nephew Kuok Khoon Hong is the chief executive officer of Wilmar, where he holds an 18% stake.