Citi lowers target on Olam to $3.10; keeps buy

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: Citigroup

Price Call: BUY

Target Price: 3.10

Citi has lowered its target price on Singapore commodities trader Olam International (OLAM.SI) to $3.10 from $3.39, but maintained its buy rating.

Citi said it has cut its target price to account for Olam’s additional 286 million new shares, or a dilution of 13.4%.

However, Olam’s equity fund raising of $731.8 million positions it well for further acquisitions, Citi said, adding that the firm has a good track record of past acquisitions.

The brokerage said Olam’s adjusted gearing is now lower at 0.4 times versus 0.9 times previously, giving it more room for growth and removing an overhang as investors have been concerned about the impact of the fund raising on the stock price.

“With risks to global growth on the downside, Olam’s exposure which is approximately 80% towards food products is a beneficial factor,” Citi said in a report. 

Olam shares closed on Friday at $2.65. The stock has fallen around 15% so far this year.