Olam Intl   

Ramping up its capex

after XD still going strong, not easy & seldom see this heppening in SGX mkt.

 

Trend not too clear... but I think its on a downtrend now.

 

It has entered into a joint venture with US-based Archer Daniels Midland to buy Cameroon-based Usicam from Saga SA of France. Interests in the joint acquisition will be evenly split between Olam and ADM, Olam said in a statement.



Both Olam and ADM plan to further upgrade and enhance the cocoa processing plant of SDV Cameroon, which Usicam had earlier acquired, to increase the quality processing of cocoa beans, Olam added.

 

Citigroup hosted a 2-day trip earlier this week for the mgt to meet with Japanese investors. The stock rose on positive feedback. Citigroup believe the long-term structural story supports valuations.



Creeping deregulation in soft commodity markets could see a fall in OECD farm subsidies. Citgroup have seen signs if this in sugar with 6m tons of European production set to be replaced by India, Thailand and Brazil. Olam appears well placed to take advantage due to its position in countries with a comparative advantage in global agricultural production. Mgt appears confident in its well-flagged target to achieve 25-26% CAGR in earnings for the next 5 years.



The capacity on the balance sheet was a key point of note. Current notional gearing is 2.3x. Stripping out liquid hedged inventory, this falls to 0.12x. The board has targeted notional gearing of 4x, leaving ample scope to leverage the balance sheet for the pursuit of growth opportunities. M&A and for dividends to remain robust - all without any threat of equity dilution.



Olam has carved a competitive niche for itself within the global free trade for agri-products. Competition is slight, the addressable market is large (US$135b), and the growth prospects - both organic (the 25-26% 5-yr CAGR target) and via potential M&A (top-up growth) - appear attractive and viable, in Citigroup's view.

 

wa lau... this baby really flying high!!!!

 

Sorry lah sister, tks for the correction!

 

R U sleeping, brother?   It was reported in 23 March 2006's Today  that Temasek had sold all its stakes in Olam (at $1.57 cts a share); IPO: 70cts) and 6.3% (original: 7.1%) of LMA (at 97cts a share: IPO: 88cts) to institutional investors. It described  it sales as "This is part of our ongoing efforts to actively manage our portfolio to maximise shareholder value."  Olam has run up so much, so the dip is just an excuse for the "manipulators" to sell it down, with the hope of buying it at lower prices later. 

 

Hi Nos, tks for the clarification. I was also wondering why price dropped. This is also one of Temask's counters.

 

No wonder Olam fell today.



Indonesian cocoa trader Pan Sino International will invest US$250m in its first cocoa processing plant here over the next three years.



The Hong Kong-listed firm, through its wholly-owned unit Hesley Cocoa International, will make the largest investment in food manufacturing in Singapore in recent years, EDB MD Koh Kheng Hua said at the groundbreaking ceremony for the new plant at Jurong Industrial Estate.



"This is our first major investment outside of Indonesia," Hesley Cocoa chief executive officer Rudi Zulfian said at a news briefing.



He said Pan Sino's venture into manufacturing will improve its margins. Zulfian said the company will spend US$150m for the initial development of the plant, which should have a capacity to process about 20, 000 tons a year of cocoa butter and cocoa powder by thef ourth quarter of 2007.



In three years' time, Hesley's annual capacity is expected to grow to 120, 000 tons.



"When ours is ready, we will likely be the largest when (the plant is) fully completed in 2009," Zulfian said. He said the two other cocoa producers in Singapore, Cadbury Schweppes and Archer Daniels Midland, have a combined production capacity of 80,000 tons a year.

 

May I have TA gurus comment on this stock please.

 

It continued rising after several brokerages raised their ratings for the stock, in view of the commodities supplier's latest results, a dealer said.



In the financial year ended June Olam's net profit jumped 32% from the year before on the back of robust sales volumes and higher net contributions from all four of its business segments.



UOBKH, which has a "hold" rating for Olam and a target price of $1.33, said the firm's strategy of targetting net contribution per tonne of any given commodity had resulted in gross contributions rising 41.6% and net contributions rising 34.4%.



DBSV, KE and CLSA have raised their ratings and price targets for Olam because of the firm's performance and prospects.

 

It will ramp up its capital expenditure in the current financial year to June 2007 to $83m, nearly double the preceding year's $45m, as it front-loads most of its six-year spending budget to ensure the group's long-term growth.It has set a $200m spending budget for six years commencing in the year to June 2006 to 2011.



Olam managing director Sunny Verghese said the heavy outlays will likely result in some fluctuations in earnings over the first three-year horizon, but he added that the group is keeping its CAGR target of 26%.



The company beat its own forecast in the first year of the three-year plan covering FY 2006 to 2008 as net profit grew 32% to $87.2m driven by strong growth in sales volume and a 16% expansion in its customer base, compared to an internal target of a 9-10% expansion.



"We might have one year of lower growth, particularly because we are investing a lot of capital now," Verghese said. "We don't want to maximize growth for short-term results at the cost of long-term growth."



The $83m capex for the current year will be spent on procurement of logistics infrastructure, including processing and warehousing facilities spread over 29 projects, he said.



Olam will complement organic growth with acquisitions. The company announced this month two small acquisitions that it expects will be earnings accretive for the group. These are the coffee processing facilities of Kraft Foods International unit Taloca & Compania Ltd in Colombia, which will be purchased for US$1.28m, and the peanut shelling and processing unit of South African agricultural company Senwes for an undisclosed amount.



"We have acquired the peanut shelling facility as part of a roll-out plan to acquire similar assets in key peanut producing countries," Verghese said. At the moment, he said Olam is in talks to make another investment in Argentina, also with a large peanut producer. "We plan to make two acquisitions a year in the sweet spot of 5% of our market capitalization," Verghese said.



"Our organic growth engine is very strong and we will only make an acquisition if it is very, very clear that it will be value accretive, so there should be enough margin of safety between the intrinsic value of target and the price we are paying." Growing global demand driven by population expansion and rising per capita income will continue to support Olam's growth, he said.



Olam currently supplies 14 product groups divided into four major business segments -- edible nuts, spices & beans; confectionery & beverage ingredients; food staples & packaged foods; and fibre & wood products.