Muddy Waters (MW) has just issued a new report on Olam International Limited (Olam), titling its “Not Changing the Old Ways”, which again raised issues over transparency and corporate governance, as well as remaining skeptical if Olam will operate differently in the future. In particular, the viability of the Gabon fertilizer project was called into question, where MW believed that Tata Chemical (TCL) is highly unlikely to participate in the project. In any case, our current forecasts do not include any contributions from Gabon as we have always held the conservative view and would only include the project if it has achieved financial close. While we expect the new MW report to weigh slightly on sentiment, we are maintaining our forecasts for now, given that we have already pared our FY14F core net profit figure by 16% recently. Maintain HOLD with an unchanged S$1.45 fair value (based on 10x FY14F EPS) for now.
New Muddy Water Report
Muddy Waters (MW) has just issued a new report on Olam International Limited (Olam), titling its “Not Changing the Old Ways” following the release of its FY13 results. The report again raised issues over transparency and corporate governance, as well as remaining skeptical if Olam will operate differently in the future; this given that there have been no changes to Olam’s board since MW’s initial report.
Gabon project comes under fire (again)
In particular, the viability of the Gabon fertilizer project was called into question, where MW believed that Tata Chemical (TCL) is highly unlikely to participate in the project. We note that during the results briefing, Olam stated that its relationship with TCL is “still strong” but added that they are “still discussing and have not reached closing conditions”. MW now recommends that Olam “fall on the sword” and terminate the project, despite spending significant money on dredging.
We have not included Gabon in our forecasts)
In any case, our current forecasts do not include any contributions from Gabon as we have always held the conservative view and would only include the project if it has achieved financial close. Recall that the Gabon project was first raised in Apr 2011 where Olam announced that TCL will invest US$290m to acquire a 25.1% stake.
Maintain HOLD with S$1.45 fair value)
While we expect the new MW report to weigh slightly on sentiment, we are maintaining our forecasts for now, given that we have already pared our FY14F core net profit figure by 16% recently. Maintain HOLD with an unchanged S$1.45 fair value (based on 10x FY14F EPS) for now.
Muddy Waters (MW) has just issued a new report on Olam International Limited (Olam), titling its “Not Changing the Old Ways” following the release of its FY13 results. The report again raised issues over transparency and corporate governance, as well as remaining skeptical if Olam will operate differently in the future; this given that there have been no changes to Olam’s board since MW’s initial report.
Gabon project comes under fire (again)
In particular, the viability of the Gabon fertilizer project was called into question, where MW believed that Tata Chemical (TCL) is highly unlikely to participate in the project. We note that during the results briefing, Olam stated that its relationship with TCL is “still strong” but added that they are “still discussing and have not reached closing conditions”. MW now recommends that Olam “fall on the sword” and terminate the project, despite spending significant money on dredging.
We have not included Gabon in our forecasts)
In any case, our current forecasts do not include any contributions from Gabon as we have always held the conservative view and would only include the project if it has achieved financial close. Recall that the Gabon project was first raised in Apr 2011 where Olam announced that TCL will invest US$290m to acquire a 25.1% stake.
Maintain HOLD with S$1.45 fair value)
While we expect the new MW report to weigh slightly on sentiment, we are maintaining our forecasts for now, given that we have already pared our FY14F core net profit figure by 16% recently. Maintain HOLD with an unchanged S$1.45 fair value (based on 10x FY14F EPS) for now.
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