Olam - Olam cut to Hold by Kim Eng on valuation grounds

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED
Research House: Kim Eng

Kim Eng Securities downgrades Olam (O32.SG) to Hold from Buy on valuation grounds. Says recent run-up triggered by news of commodity supplier’s merger talks with Louis Dreyfus Commodities may have been overdone, says Dow Jones.



“Such an agreement between the major shareholders and managements is likely to take some time to materialise. With their brilliant track record of delivering growth, Olam CEO Sunny Verghese and his team may understandably not be keen to come under the larger LDC,” says Kim Eng.

But notes opportunity to consolidate with bigger company “in an industry where scale does matter” still positive for Olam. Lifts target price to $3.23 from $3.15, pegged at 25x FY11 P/E vs 20x FY11 P/E previously, to align with 5-year average. Shares +1.2% at $3.35.