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报告摘要

Olam International Summary

Core Content

Olam International is an integrated supplier of raw and processed agricultural commodities, with operations spanning sourcing, processing, storage, transportation, and marketing. The company's stock is currently rated as HOLD by Maybank KE, with a target price of SGD1.57, up from SGD1.55. The rating change reflects a shift from Sell to HOLD due to limited downside risk in the share price and management's strategic move to de-risk the balance sheet.

Key Information

Share Price: SGD1.54
Target Price: SGD1.57
Shares Issued: 2,390.2 million
Market Cap: USD 2,953.2 million
3-mth Avg Daily Turnover: USD 6.2 million
STI Index: 3,203.03
Free Float: 55.7%
Major Shareholders:
- Kewalram Chanrai: 20%
- Temasek Holdings: 21%
- Management: 11%

Key Indicators

Metric	Value
ROE (%)	7.8
Adjusted Net Gearing (%)	77
NAV/shr (SGD)	1.49
Interest Cover (x)	2.0

Investment Case

Strategic Shift

Management has shifted from an acquisition-driven model to a de-risking strategy.
Capex guidance for FY3/14–16 has been reduced by SGD1b to SGD1.2–1.6b.
Aim is to achieve free cash flow positivity by FY3/14, though the analysis suggests this might be delayed to FY3/15.

Concerns

Slower Growth: The reduction in capex is expected to slow volume and earnings growth.
High Gearing: Olam's net gearing is the highest among its peers (196.6% vs. 94.5% for Noble and 95.4% for Wilmar), making it vulnerable to interest rate hikes.
Valuation Discount: Despite some improvement in the balance sheet, Olam's valuation is likely to remain discounted due to its weak financial position and exposure to unstable geographies like Africa.

Valuation and Recommendation

Current P/BV: 0.9x (below the trailing average of 1.2x since 2008).
Target Price: SGD1.57, based on a 12x FY14 PER, which is 25% lower than the trailing P/E average of 15.7x.
Dividend Yield: 2.8% (FY14), expected to rise to 3.8% by FY16.
Free Cash Flow: Expected to turn positive by FY15, with an estimated 158.2 SGD million in FY16.

Segment Outlook

Edible Nuts, Spices & Beans

Strong market position in cashew, almond, sesame, and hazelnuts.
Expected 7.8% volume growth and 10.0% revenue growth for the next three years.
Less competition in niche markets, providing margin stability.

Confectionery & Beverage Ingredients

Top three player in coffee and leading trader in cocoa.
Coffee prices are expected to stabilize, which is positive.
Concerns over cocoa industry changes due to recent mergers, which may reduce pricing power.

Staples & Packaged Food

Strong presence in Africa with significant growth in grains and packaged foods.
Revenue growth of 12.1% and volume growth of 8.3% expected over the next three years.

Industrial Raw Materials

Most vulnerable to economic downturns.
Not a major growth area for the future.

Financial Highlights

Earnings Table

FYE June (SGD m)	FY12	FY13	FY14F	FY15F	FY16F
Revenue	17093.8	20801.8	23126.8	24163.4	26402.5
EBITDA	950.9	1111.9	1301.8	1510.8	1680.1
Core Net Profit	268.7	286.7	314.3	380.0	456.7
Dilutive EPS (SG cents)	10.0	11.9	13.1	15.8	19.0
EPS Growth (%)	-32.4%	18.6%	9.6%	20.9%	20.2%
DPS (SG cents)	3.9	3.9	4.3	5.0	5.9
PER	15.3	12.9	11.8	9.7	8.1
EV/EBITDA (x)	11.9	10.2	8.7	7.5	6.8
Net Debt Gearing	187.3%	196.6%	192.5%	178.0%	164.8%
ROE	7.9%	7.8%	7.9%	8.8%	9.6%
ROA	1.9%	1.9%	1.8%	2.1%	2.3%

Earnings Sensitivity to Interest Rate

FY14 Net Profit	Noble	Olam	Wilmar
SGD m	542.8	397.3	1,601.7
Interest Expense	-418.0	-610.9	-618.6
Net Profit Impact	-9.8%	-18.5%	-3.2%

Summary

Valuation: Trading at a historical low, with limited downside risk.
Growth Outlook: Slower growth due to reduced capex and increased focus on de-risking.
Balance Sheet: Still weak, with high gearing, making it vulnerable to interest rate hikes.
Segment Performance: Edible Nuts, Staples & Packaged Food are expected to show better growth, while Confectionery & Beverage Ingredients and Industrial Raw Materials may face challenges.
Recommendation: HOLD with a target price of SGD1.57, based on a 12x FY14 PER. Preferred alternative for commodity traders is Wilmar, rated BUY with a target price of SGD4.30.