Olam - Nomura cuts Olam to 'neutral', keeps price target

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED
Research House: Nomura

Nomura has cut its rating on commodities firm Olam International <OLAM.SI> to “neutral” from “buy”, citing rich valuations.



But the brokerage said it maintained its target price of $3.40, which it will review should Olam and Louis Dreyfus announce a merger deal. 

     

STATEMENT: 

Nomura said that since Olam’s 2010 financial year results in August, it has outperformed the broader Straits Times Index and its peers Wilmar International <WLIL.SI> and Noble Group <NOBG.SI>. 

The brokerage said that while the first leg of the run was led by Olam’s strong results, which saw core earnings grow by 47%, the second leg has been fuelled by speculation over a possible merger between Olam and French commodities group Louis Dreyfus. 

Nomura said current valuations for Olam, a 21 times price-earnings ratio for the firm’s 2011 calendar year, seem rich and the stock could trade range-bound pending any announcement regarding the merger. 

“Although it may be too early to comment on whether the deal will actually happen, if it does, we think it would be positive for both as there may be scope for product, geographical and channel synergies,” Nomura said in a report. 

At 0204 GMT, Olam shares were down 0.6% at $3.30 on a volume of 708,000 shares.