Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED
Research House: CLSA
Monday, CLSA released a report citing the sustainability of Nigeria’s export incentives (a government initiative to encourage exports of certain products) as a key concern.
Company Name: OLAM INTERNATIONAL LIMITED
Research House: CLSA
Olam (O32.SG) is off 5.9% at $2.73 in active trade with an analyst at a local brokerage citing a report from CLSA, which raises concerns about Olam’s Nigerian operations, as the reason behind the selling.
“That, in addition to the weak market is behind the sharp fall,” he says, adding “the Middle East situation is not too much of an issue, as Olam just has operations in Egypt which should be less than 5% of revenue.”
“That, in addition to the weak market is behind the sharp fall,” he says, adding “the Middle East situation is not too much of an issue, as Olam just has operations in Egypt which should be less than 5% of revenue.”
Monday, CLSA released a report citing the sustainability of Nigeria’s export incentives (a government initiative to encourage exports of certain products) as a key concern.
They estimate these incentives make up about 30%-40% of Olam’s profits. The house also says “there are multiple and sometimes significant differences in audited and unaudited statements” which raise concerns regarding internal controls.
It concludes, “export incentives dependent earnings, negative EVAs, concerns about internal controls warrant a significantly higher risk premium and consequently a lower multiple.”
The house cuts its target to $1.60, on 10X 2012 P/E, has a Conviction Sell call.
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