Company Name: OLAM INTERNATIONAL LIMITED
| Research House: OCBC | Price Call: HOLD | Target Price: 1.86 |
OCBC Investment Research lowered its target price on commodity company Olam International to $1.86 from $2.24, saying growing uncertainty in Europe may continue to cause increased volatility in commodity stocks.
Shares of Olam were down 0.9% at $1.68. They have fallen about 21% so far this year, underperforming the Straits Times Index’s gain of 5% in the same period.
Olam said on Tuesday it would invest US$240 million ($307 million) in its first sugar milling asset in Brazil, Usina Acucareira Passos S.A.
OCBC, which maintained its hold rating on the stock, said Olam’s management believed the latest acquisition was part of its plan to boost its milling assets in large sugar-producing countries that have a cost advantage.
However, the broker also noted that Olam expects sugar prices to continue to fall into the fourth quarter of the year, driven by the sugar surplus, but that prices should eventually bottom out before the mill reaches a steady state of production in fiscal 2016.
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