Shares of Olam International fell as much as 3% to a three-week low after the Singapore commodities firm reported a 14% fall in fourth-quarter net profit and several brokers cut their target prices.
Olam shares hit an intra-day low of $1.93 on Wednesday, the weakest level since Aug 7. More than 19 million shares changed hands, 1.8 times the average full-day volume over the past 30 days.
Olam reported net profit of $109.5 million for the three months ended June, down from $127.4 million a year earlier, partly dragged by its industrial raw materials segment.
“Olam expects challenging market conditions to persist in the near term (in particular cotton, for at least another six months),” DBS Vickers said, cutting its earnings estimates for 2013-2015 fiscal years by 9-14% on lower margin outlook.
DBS reduced its target price on Olam to $1.80 from $2.00 and maintained its ‘hold‘ rating.
Nomura said with Olam shares having gone up 20% in the last three months and no visible near-term catalyst, it expects some weakness in the stock. Nomura cut its target price to $2.50 from $2.60 but maintained ‘buy’.
CIMB Research said it believes Olam has survived the worst of the earnings compression, as cotton is expected to recover from the second quarter of 2013 and the group will reap rewards as acquisitions start to pay off.
CIMB maintained its ‘outperform” rating and $2.61 target price on Olam.
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