Thursday, November 29, 2012

Olam rises, off 3-1/2 year low

Stock Name: Olam
Research House: OCBCPrice Call: BUYTarget Price: 1.80

Shares of Singapore’s Olam International rose 3%, after hitting a three-and-a-half year low on Wednesday, as analysts said the commodity trader’s detailed defence against allegations from short-seller Muddy Waters was largely satisfactory.

By 9:34 a.m., Olam shares were 2.7% up at $1.54, but have lost 27.7% since the start of the year, compared with the Straits Times Index’s 14.4% rise.

“In our view, the explanations were satisfactory and should clear any misunderstanding caused by Muddy Waters’ accusations,” said CIMB Research, which upgraded Olam to ’neutral’ from ’trading sell’ and kept its $1.59 target price.

CIMB believes the worst of the clash with Muddy Waters is over and Olam’s share price should find support at book value of $1.35. However, it warned that sentiment could remain subdued as investors continue to remain cautious.

Citigroup was positive on Olam’s indication that it may consider reducing its expansion pace as investors signalled that greater execution focus and reduced leverage were important, given a tough macro environment.

OCBC Investment Research also believed investors are likely to adopt a cautious approach to valuing Olam. It now values the company at 10 times 2013 earnings per share versus 12.5 times previously, lowering its target price to $1.44 from $1.80.

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