Lang
Wilmar International shares fell on Friday (26 September) after the palm oil group's corruption acquittal was overturned, with RHB downgrading the stock to "sell" from "neutral".
The bank also cut its target price for the stock from S$2.75 to S$2.50 - 13.5 per cent below Wilmar's Thursday closing price of S$2.89.
The Mainboard-listed company said on Thursday that Indonesia's Supreme Court had overturned its acquittal in a corruption case involving palm oil export licences. Wilmar was accused of making illegal profits by obtaining these licences during a nationwide palm oil shortage that had prompted Indonesia to impose controls on exports of the commodity.
Shortly after the market opened, the stock fell by as much as 3.8 per cent to S$2.78, with 3.3 million shares traded by 9.03am. It then recouped its losses to close on Friday at S$2.85, but remained down 1.4 per cent, or S$0.04, with 20.5 million shares traded.
Commenting on the corruption ruling, RHB said Wilmar's earnings were likely to be hit by the forfeiture of a security deposit that authorities had seized from the company in connection with the investigation.
"While the final amount of the penalty has yet to be released, the forfeiture of the US$729 million deposit would cut projected 2025 earnings by 65 per cent," the bank said.
In May, Indonesian authorities seized 11.8 trillion rupiah (S$928 million) from Wilmar as part of the corruption investigation. The company said the assets were a security deposit that could have been returned had the acquittal been upheld, or forfeited if it were overturned.
RHB said it would not adjust its earnings forecasts for Wilmar until full details of the penalty are released.
However, it noted that the company's reputation was likely to suffer as a result of the Indonesian Supreme Court's ruling. "While Wilmar maintains its innocence, we believe this outcome will lead to negative perception of the group."
Wilmar had initially been acquitted of the corruption charges by a lower court in March.
However, the case was reopened after the judges who issued the acquittal were accused of taking bribes to clear Wilmar's name, and were arrested.
Other Investigations
RHB believes the overturning of Wilmar's acquittal could reflect the stance of Indonesian authorities towards other investigations involving the group.
"We are also concerned that this may signal the direction of the Indonesian government with regard to other ongoing investigations into rice," it added, referring to another corruption case in which Wilmar is involved.
That case centres on rice label mislabelling and the company's alleged sale of a lower-quality version of the commodity.
Executives at Wilmar's wholly-owned unit, rice producer PT Padi Indonesia Maju, are suspected of mixing lower-grade rice grains with premium rice grains and selling the blend as a high-quality product.
RHB said the case is part of a broader Indonesian police investigation into four major rice producers, including Wilmar's subsidiary. It noted that the executives involved have been charged under the country's consumer protection law, which carries penalties of up to 20 years in prison and a fine of up to 10 billion rupiah.
Source: The Star