Olam International (Olam) reported 1HFY13 results which were slightly ahead of our forecast. Revenue grew 24.3% to S$9589.5m, meeting 48.1% of our FY13 projection; while estimated core net profit came in around S$147.6m, also meeting around 48.4% of our FY13 estimate. However, its net gearing increased from 1.95x in 1HFY12 to 2.21x in 1HFY13. Management meanwhile is in the process of recalibrating its operations after the Muddy Waters’ incident. While we see the recalibration exercise as positive, we do not intend to make any changes to our forecasts just yet. But we are pushing our 10x valuation from FY13F EPS to blended FY13F/FY14F EPS and our fair value improves from S$1.44 to S$1.50. Maintain HOLD for now.
1HFY13 results slightly ahead
Olam International Limited (Olam) reported a 24.3% rise in 1HFY13 revenue to S$9589.5m, meeting 48.1% of our FY13 forecast, driven by 71.9% growth in sales volume. Reported net profit climbed 21.3% to S$197.3m; but stripping out biological fair value gains (S$22.1m) and disposal gain of S$27.8m from the sale/lease back of its US almond orchard land, we estimate that core net profit came in around S$147.6m, also meeting around 48.4% of our FY13 estimate. As 1H earnings typically make up 30-40% of its full-year profit, we deem the results to be slightly ahead of our forecast.
Net gearing edges up to 2.2x
On the balance sheet front, Olam increased its borrowings further to S$8.8b as of 31 Dec 2012 from S$7.5b as of 30 Jun 2012, with the increase going towards working capital/M&A projects/capex. As a result, its net gear edged up further from 1.95x in 1HFY12 to 2.21x in 1HFY13. However, Olam notes that Dec quarter typically sees the highest gearing due to seasonality. Again, it stresses that its credit lines remain ample and it is comfortable up to a net gearing of 2.5x.
Recalibration in the works
Nevertheless, Olam recognizes the need for a “recalibration exercise” in the wake of the recent Muddy Waters’ incident; and expects to complete the exercise within the next three months. Olam further notes that there is “no sacred cows” and this may include revising its S$1.7b capex plan for the next two years. It also did not rule out more “asset optimization” in the future.
Not making any changes now
While we see the recalibration exercise as positive, we do not intend to make any changes to our forecasts just yet. But we are pushing our 10x valuation from FY13F EPS to blended FY13F/FY14F EPS and our fair value improves from S$1.44 to S$1.50. Maintain HOLD for now.
Olam International Limited (Olam) reported a 24.3% rise in 1HFY13 revenue to S$9589.5m, meeting 48.1% of our FY13 forecast, driven by 71.9% growth in sales volume. Reported net profit climbed 21.3% to S$197.3m; but stripping out biological fair value gains (S$22.1m) and disposal gain of S$27.8m from the sale/lease back of its US almond orchard land, we estimate that core net profit came in around S$147.6m, also meeting around 48.4% of our FY13 estimate. As 1H earnings typically make up 30-40% of its full-year profit, we deem the results to be slightly ahead of our forecast.
Net gearing edges up to 2.2x
On the balance sheet front, Olam increased its borrowings further to S$8.8b as of 31 Dec 2012 from S$7.5b as of 30 Jun 2012, with the increase going towards working capital/M&A projects/capex. As a result, its net gear edged up further from 1.95x in 1HFY12 to 2.21x in 1HFY13. However, Olam notes that Dec quarter typically sees the highest gearing due to seasonality. Again, it stresses that its credit lines remain ample and it is comfortable up to a net gearing of 2.5x.
Recalibration in the works
Nevertheless, Olam recognizes the need for a “recalibration exercise” in the wake of the recent Muddy Waters’ incident; and expects to complete the exercise within the next three months. Olam further notes that there is “no sacred cows” and this may include revising its S$1.7b capex plan for the next two years. It also did not rule out more “asset optimization” in the future.
Not making any changes now
While we see the recalibration exercise as positive, we do not intend to make any changes to our forecasts just yet. But we are pushing our 10x valuation from FY13F EPS to blended FY13F/FY14F EPS and our fair value improves from S$1.44 to S$1.50. Maintain HOLD for now.
No comments:
Post a Comment