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Olam: Nomura recomends hanging on, OCBC says accept

In Commodities on 20/03/2014 at 4:47 am

Nice to see that Nomura agrees with me on Olam, one of the world’s biggest trader of coffee, rice and cashew nuts.

Nomura advised Olam shareholders to reject Temasek unit Breedens’ takeover offer of S$2.23 a share, saying it believed the commodities firm was worth around S$2.50 a share.

“From a long-term perspective, we still see significant value in Olam, as various gestating assets start contributing over the next few years,”

Nomura estimates that Olam’s earnings could grow by more than 20% per annum in the next three years.

It added that Temasek’s emergence as Olam’s majority shareholder was positive for shareholders, as this would help reduce concerns over the firm’s access to funds, which is key in global supply chain businesses.

Temasek’s offer price which works out to about 13.3 times estimated earnings for 2014 — was not expensive as it was in line with recent transactions in the agriculture business.

Citi Research in a note last Friday that it does not expect a high success rate for the offer, given that Olam is currently midway through working its asset portfolio towards full contribution.

OCBC recommended that investors accept the offer or sell into the market if the price there is higher

“While things are moving in the correct direction, the medium-term outlook for commodities, especially hard commodities, continues to remain quite challenging in our view … do not expect to see a competing offer for Olam.”

 

  1. […] Thoughts of a Cynical Investor: Olam: Nomura recomends hanging on, OCBC says accept – Likedatosocanmeh: Temasek should not fear transparency if it has not incurred losses […]

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