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."
"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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