Company Name: OLAM INTERNATIONAL LIMITED
| Research House: Religare Capital | Price Call: SELL | Target Price: 1.40 |
Religare Capital Markets downgraded Olam International to ‘sell’ from ’buy’ and cut its target price to $1.40 from $2.40, as it expects the commodity trader’s shares to be weighed down by concerns raised by short-seller Muddy Waters.
By 12:26 p.m., Olam shares were down 0.96% at $1.55, off an intraday low of $1.465, which was a three-and-a-half year low. Its shares have plummeted 27.5% since the start of the year, compared with a 13.5% rise in the Straits Times Index.
"Olam shares will face difficulty re-rating upwards and sustaining even a moderate earnings multiple for the next few quarters, even if the financial risks Muddy Waters warns of don’t materialize," Religare said in a note.
The brokerage noted Olam’s guidance that it won’t be generating positive free cash flow until 2015, making it hard for the company to completely dispel the concerns raised.
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