Singapore Company Guide Olam International Version 7 | Bloomberg: OLAM SP | Reuters: OLAM.SI Refer to important disclosures at the end of this report DBS Group Research . Equity 1 Mar 2018 HOLD Positives priced in for now Last Traded Price ( 28 Feb 2018): S$2.25 (STI : 3,517.94) Limited upside for now. We maintain our HOLD call on Olam Price Target 12-mth: S$2.31 (3% upside) (Prev S$2.15) International (Olam) with a revised TP of S$2.31. Olam appears Analyst to have successfully integrated the US$1.2bn acquisition of Mervin SONG, CFA +65 6682 3715
[email protected] ADM Cocoa, and has achieved its target of positive free cash flow to firm/equity by end FY17. However, with limited upside to our TP, we believe the stock will remain range bound. In What’s New addition, with return on equity (ROE) still suboptimal, a re-rating • FY17 core profit up 23% y-o-y - above expectations beyond its average PE multiple of 16x implied by our TP is • Better than expected performance from edible nuts unlikely at this stage. • Achieves target of positive free cashflow to firm and Where we differ – Sell calls unwarranted. Consensus has sell equity ratings on Olam, which we believe is unwarranted. While Olam • Rewards shareholders with higher FY17 DPS of 7.5 Scts, still generates suboptimal returns, we believe the company up from 6.0 Scts in FY16 should deliver healthy 8% EPS growth in 2018, given continued maturity of the upstream assets, growth of in its Edible Nuts and recovery at its Confectionary & Beverage division.