Olam International

UOBKayhian on 1 Sep 2014

FY14F PE (x): 18.9.
FY15F PE (x): 18.3
Olam International (OLAM SP) reported FY14 core net profit of S$325.4m, below
expectation of S$368m. FY14 reported net profit of S$608.5m (vs net profit S$362.6m)
includes an exceptional gain of S$283.1m.
Moderation in sale volume and focus on margin. Management had guided for more
modest growth in sales volume after seeing the contraction in FY13. The slower sales
volume growth is intentional as Olam would like to focus more on products that give
better profit margins, eg it divested its grain operations in Australia and lowered the
grain trading operation in South Africa. For FY13, sales volume declined 6.7% yoy due
to the higher base in FY13 (49.5% growth over FY12) and it has targeted to reduce
sales volume in the lower margin business as per its strategic plan. We are expecting a
marginal 1.8% sale volume growth for FY15 largely driven by the Edible Nuts and
Confectionary divisions.
Maintain HOLD with higher target price of S$2.30 pegged to FY15F PE of 12.7x (1 SD
below 5-years CAGR). Entry price is S$2.10.