Company Name: OLAM INTERNATIONAL LIMITED
| Research House: Credit Suisse | Price Call: BUY | Target Price: 3.70 |
Credit Suisse has lowered its target price on Singapore commodities trader Olam International (OLAM.SI) to $3.70 from $4.19 to reflect the 13% dilution from the company’s equity-raising exercise in June.
But the bank maintained its outperform rating on Olam stock.
Olam raised around $740 million through a three-tranche equity fundraising in June, which Credit Suisse said has resulted in a 13% dilution.
However, the bank said Olam was trading at a price-to-book of 2.0 times, close to the lows hit in 2008-2009, and this did not reflect the solid fundamentals of the company.
Credit Suisse expects Olam to report strong fourth-quarter results on Aug 29. It estimates that for Olam’s 2011 fiscal year ended June, the company will report a 29% year-on-year growth in core net profit on the back of 16% volume increase.
It added that it believes Olam has sufficient investment firepower to fund its growth initiatives over the next three years and it expects the company to announce further value-accretive deals in the medium term.
At 10:37 a.m., Olam shares were flat at $2.21. The stock has lost around 29 percent so far this year, hit by concerns about falling demand for commodities amid a weakening global economy.
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