DMG & Partners Research on 17 Jan 2012
DMG & Partners Research in a Jan 17 research report says: "Olam has a net profit target of US$1 billion by FY2016. The bulk of the target will be achieved via organic SCM business growth (forecast 15-17% pa volume growth) and already-announced projects.
"In addition, management will work on upstream initiatives eg on plantations and fertilizer business as well as selective mid-stream projects to drive its earnings. Management does not foresee any further equity fund raising to enable it to meet the US$1 billion target. Instead, management will look to borrowings, given management’s comfort zone of 2-3x leverage, versus Sep 11’s 1.7x.
"We also like Olam’s sound track record - 33% CAGR net contribution over past 3 years. Target price of $2.98. Olam’s FY12 PE of 12.7x is also lower than historical average of 18x. MAINTAIN BUY."
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