Company Guide Olam International

Version 6 | Bloomberg: OLAM SP | Reuters: OLAM.SI Refer to important disclosures at the end of this report

DBS Group Research . Equity 16 May 2017

HOLD Holding tight Last Traded Price ( 15 May 2017): S$1.99 (STI : 3,264.21) Limited upside for now. We maintain our HOLD call on Olam Price Target 12-mth: S$2.15 (8% upside) (Prev S$2.12) International (Olam) with a revised TP of S$2.15. Olam appears to have successfully integrated the US$1.2bn acquisition of ADM Analyst Cocoa, and is on track to achieve positive free cash flow to Mervin SONG CFA +65 6682 3715 [email protected] firm/equity by the year end. However, with limited upside to our TP, we believe the stock will remain range bound. In addition, with return on equity (ROE) still suboptimal, a re-rating beyond its What’s New average PE multiple of 16x implied by our TP is unlikely at this  1Q17 core profit up 4% y-o-y, in line with stage. expectations Where we differ – Sell calls unwarranted. Consensus has sell  Strong contribution from Edible Nuts and Food ratings on Olam, which we believe is unwarranted. While Olam Staples divisions faces the challenges of declining cocoa prices and softer cocoa processing margins this year and still generates suboptimal  Positive free cashflow stronger in 1Q17, on track returns, we believe the company should deliver decent EPS to achieve positive free cashflow to equity by year growth this year, given strong performance from Edible Nuts and end recovery at its Food Staples division. Significant medium term upside. Despite our cautious stance on Olam’s near term share price performance, we remain positive on Price Relative Olam’s long term outlook. Currently, Olam has S$5.1bn worth of immature assets which on maturity, could generate an additional c.S$0.76bn-1.26bn of EBITDA. All these factors may enable Olam’s share price to re-rate closer to S$2.23 and S$2.75 in the medium term, price levels at which Temasek and Mitsubishi acquired their most recent equity interests in Olam respectively.

Valuation: On the back of higher profits from the redemption of its 7% Forecasts and Valuation perpetual securities, we raised our TP to S$2.15 from S$2.12. Our FY Dec (S$ m) 2015A 2016A 2017F 2018F TP is a blend of our PE valuation of S$2.16 and our DCF valuation Revenue 19,053 20,587 21,120 21,522 EBITDA 1,137 1,189 1,304 1,392 of S$2.15. Pre-tax Profit (34.2) 433 475 595 Net Profit (123) 318 338 446 Key Risks to Our View: Net Pft (Pre Ex.) 339 316 367 463 The key risk to our neutral stance is a faster than expected delivery Net Pft Gth (Pre-ex) (%) 17.0 (6.7) 16.2 26.0 of earnings from Olam’s gestating/immature assets. On the EPS (S cts) (4.7) 11.5 12.2 14.0 downside, with gearing in excess of 1.5x, Olam’s earnings are EPS Pre Ex. (S cts) 13.0 11.5 13.2 14.5 EPS Gth Pre Ex (%) 9 (12) 15 10 vulnerable to a significant rise in interest rates. Diluted EPS (S cts) (4.2) 9.76 10.4 13.7 Net DPS (S cts) 6.00 6.00 6.00 6.00 At A Glance BV Per Share (S cts) 175 164 170 203 Issued Capital (m shrs) 2,731 PE (X) nm 17.2 16.3 14.2 Mkt. Cap (S$m/US$m) 5,434 / 3,870 PE Pre Ex. (X) 15.3 17.3 15.0 13.7 Major Shareholders (%) P/Cash Flow (X) nm 8.8 6.6 6.4 Temasek Capital 52.2 EV/EBITDA (X) 13.9 15.3 13.9 13.0 Mitsubishi Corporation 20.0 Net Div Yield (%) 3.0 3.0 3.0 3.0 P/Book Value (X) 1.1 1.2 1.2 1.0 Orbis Group 7.8 Net Debt/Equity (X) 1.9 2.0 2.1 1.7 Free Float (%) 20.0 ROAE (%) 7.3 6.0 6.8 7.9 3m Avg. Daily Val (US$m) 1.3 Earnin gs Rev (%): 2 4 ICB Industry : Consumer Goods / Food Producers Consensus EPS (S cts): 13.5 14.0 Other Broker Recs: B: 0 S: 1 H: 1 Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P

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Olam International

WHAT’S NEW Solid start to the year

1Q17 results in line with expectations with better free cash  EBITDA for the Industrial Raw Materials segment flows was down marginally by 5% y-o-y due to sluggish  1Q17 core profit (excluding exceptional, biological demand for wood products in India. losses and after perpetual dividends) rose 4% y-o-y to S$132.7m which was in line with expectations. Gearing stable  The growth in core profit was largely attributed to  Gearing as measured by net debt (excluding readily increased contribution from the Edible Nuts and marketable inventories)/equity was stable at 99.4% Food Staples divisions, partially offset by higher (99.7% in 4Q16 and 99.9% in 1Q16). interest costs and coupon payments post the  Olam remains in a strong liquidity position, with issuance of additional perpetual securities in 2H16. S$7.8bn of unutilised bank lines, readily marketable  Meanwhile, Olam continues to make good progress inventories of S$5.8bn and cash of S$2.6bn. This is on the cash flow front. It generated positive free sufficient to cover its short term debt of c. S$5.6bn. cash flow to firm (FCFF) of S$135m, an improvement from –S$156m in 1Q16. In addition, Redemption of 7% perpetual securities free cash flow to equity (FCFE) improved to –S$42m  Olam announced in 1Q17 that plans to redeem its versus –S$284m in 1Q16. Olam appears to be on relatively expensive 7% perpetual securities on 1 track to achieve its target of positive FCFE by year September 2017. After incorporating the buyback of end. these securities, we raised our FY17-18F core profit by 2-4%. Strong contribution from Edible Nuts and Food Staples  On the back of higher profits, we also raised our TP  The Edible Nuts segment had a strong start to the to S$2.15 from S$2.12. Our TP is a blend of our PE year with EBITDA rising 72% y-o-y to S$138m. This valuation of S$2.16 and our DCF valuation of was underpinned by 23% y-o-y growth in volumes. S$2.15 Our PE valuation remains pegged to Olam’s In addition, the segment benefited from the average PE multiple which now stands at c.16.3x. acquisition of Brooks Peanuts, recovery in Almond  prices and better margins in the cashew business. Maintain HOLD  The Food Staples division also had a strong quarter,  With limited upside to our revised TP of S$2.15, we with segment EBITDA rising 38% y-o-y to S$118m. maintain our HOLD recommendation. The improved performance was driven by growth in grains trading volumes, better wheat milling operations in and reduced loses at the dairy farming operations in Uruguay. Meanwhile, the Confectionary & Beverage segment  had soft quarter as expected with EBITDA falling by

29% y-o-y. This was largely due to softer performance from the cocoa supply chain business as most of the cocoa origination volumes are now used for Olam’s in-house processing business. Meanwhile, cocoa processing margins compressed from the high levels achieved last year.

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Page 2 Company Guide Olam International

Quarterly / Interim Income Statement (S$m) FY Dec 1Q2016 4Q2016 1Q2017 % chg yoy % chg qoq

Revenue 4,761 6,106 5,804 21.9 (4.9) Cost of Goods Sold (4,155) (5,510) (5,208) 25.3 (5.5) Gross Profit 606 596 596 (1.7) 0.0 Other Oper. (Exp)/Inc (348) (384) (287) (17.5) (25.2) Operating Profit 258 213 309 19.7 45.4 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - - Associates & JV Inc (0.6) 12.0 3.02 nm (74.8) Net Interest (Exp)/Inc (99.4) (112) (140) (40.4) (24.6) Exceptional Gain/(Loss) (17.8) 17.7 (2.0) 88.9 nm Pre-tax Profit 140 130 170 21.4 30.9 Tax (31.0) (27.1) (34.0) 9.6 25.4 Minority Interest 4.23 (0.9) 7.36 74.0 nm Net Profit 109 88.5 131 19.5 47.7 Net profit bef Except. 127 70.8 133 4.3 87.5 EBITDA 338 331 401 18.5 21.0

Margins (%) Gross Margins 12.7 9.8 10.3 Opg Profit Margins 5.4 3.5 5.3 Net Profit Margins 2.3 1.4 2.3

Source of all data: Company, DBS Bank

Free cash flow 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Operating Cash flow (before interest & tax) 372.1 282.4 195.3 301.0 345.4 315.9 203.8 378.4 401.8 Changes in working capital (162.7) (112.3) (252.4) (468.5) (35.5) 165.5 (182.5) (175.2) (74.7) Cashflow from operations 209.4 170.1 (57.1) (167.5) 309.9 481.4 21.3 203.2 327.1 Tax paid (10.2) (25.7) (17.2) (74.7) (21.6) (23.1) (17.1) 13.4 (7.0) Capex/Investments (79.0) (129.5) (55.0) (1,826.2) (444.3) (111.1) (345.9) (484.2) (185.2) Free Cash Flow to Firm (FCFF) 120.2 14.9 (129.3) (2,068.4) (156.0) 347.2 (341.7) (267.6) 134.9 Net interest Paid (177.6) (72.5) (112.2) (116.1) (127.8) (68.4) (119.5) (32.0) (176.4)

Free Cash Flow to Equity (FCFE) (57.4) (57.6) (241.5) (2,184.5) (283.8) 278.8 (461.2) (299.6) (41.5)

Source: Olam, DBS Bank

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Page 3 Company Guide

Olam International

1Q17 Segmental performance 1Q16 4Q16 1Q17 % Chg % Chg Volumes ('000 MT) YoY QoQ Nuts, Spices & Beans 300.4 421.1 370.2 23.2 -12.1 Confectionary & Beverage 533.1 379.5 506.2 -5.0 33.4 Food Staples & Packaged Foods 1,792.4 3,035.1 3,146.6 75.6 3.7

Industrial Raw Materials 339.7 374.6 438.7 29.1 17.1 Total 2,965.6 4,210.3 4,461.7 50.4 6.0

% Chg % Chg Revenues (S$m) 1Q16 4Q16 1Q17 YoY QoQ Nuts, Spices & Beans 766.8 1,224.1 911.3 18.8 -25.6 Confectionary & Beverage 2,250.7 2,217.8 2,089.3 -7.2 -5.8 Food Staples & Packaged Foods 1,201.4 2,028.2 1,975.7 64.4 -2.6 Industrial Raw Materials 542.6 636.1 827.7 52.5 30.1 Financial Services 0.0 0.0 0.0 NM NM Total 4,761.5 6,106.2 5,804.0 21.9 -4.9

% Chg % Chg EBITDA (S$m) 1Q16 4Q16 1Q17 YoY QoQ Nuts, Spices & Beans 80.2 87.6 138.0 72.1 57.5 Confectionary & Beverage 105.2 141.2 75.0 -28.7 -46.9 Food Staples & Packaged Foods 85.7 104.6 118.3 38.0 13.1

Industrial Raw Materials 65.2 18.1 62.2 -4.6 243.6 Commodity Financial Services (3.5) (2.6) 5.1 NM NM Total 332.8 348.9 398.6 19.8 14.2

% Chg % Chg EBITDA/MT (S$m) 1Q16 4Q16 1Q17 YoY QoQ Nuts, Spices & Beans 267 208 373 39.6 79.2 Confectionary & Beverage 197 372 148 -24.9 -60.2 Food Staples & Packaged Foods 48 34 38 -21.4 9.1 Industrial Raw Materials 192 48 142 -26.1 193.4

Source: Olam, DBS Bank

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Page 4 Company Guide Olam International

Edible nuts EBITDA/MT CRITICAL DATA POINTS TO WATCH

Critical Factors Maturing of gestating or partially contributing assets. Olam currently has S$5.1bn worth of immature assets, comprising S$1bn of gestating and S$4.1bn of partly contributing assets. Assuming these assets mature as planned, Olam could generate an additional c.S$0.76-1.26bn of EBITDA in the medium term (approximately 60-100% of FY16 EBITDA).

Boost from acquisition of ADM Cocoa. Olam successfully integrated the US$1.2bn acquisition of ADM Cocoa last year. Confec & Bev. EBITDA/MT Post this transaction, Olam is now among the top 3 global cocoa processors with a c.16% global market share in the US$16bn processing market, where demand growth is expected to accelerate from 3% p.a. to 3.4-4.3% in the coming decade. In addition, as an integrated player with substantial presence in the sourcing and now the processing segment of the cocoa value chain, Olam should be able to extract higher profits through greater scale and better procurement. Additional upside would also come from the planned US$35-40m worth of synergies by the second year of ownership. Food staples EBITDA/MT Turnaround in dairy and packaged food businesses Olam’s earnings was previously negatively impacted by its dairy and packaged food businesses. The dairy business which has undergone several rounds of structuring has since stabilised. While the packaged food business was hurt by devaluation of various African currencies leading to a rise in the cost of various imported raw materials and continues to face a volatile currency market, the business remains in a strong position relative to its competitors. Nevertheless, with the passage of time and growing consumption in West Africa, we believe Olam will be Industrial EBITDA/MT able to raise the selling price for its goods, to offset higher raw material costs thereby restoring margins.

New partnership with Mitsubishi Corporation. Mitsubishi Corporation (MC) recently took a 20% stake in Olam at S$2.75 per share, with Olam also raising S$915m through a share placement. Beyond strengthening Olam’s balance sheet and providing firepower for additional acquisitions, the new strategic partnership presents new business opportunities for Olam, as it can tap on MC’s global distribution network, expertise in areas such as rice farming and milling, as well as Overall volume growth % potentially distributing MC’s packaged food brands in Africa. In the near term, a JV will also be established in Japan to act as an importer and marketer of various agricultural products.

Source: Company, DBS Bank

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Page 5 Company Guide

Olam International

Leverage & Asset Turnover (x) Balance Sheet: Gearing is below its target. As at March 2017, on an adjusted basis excluding RMI (readily marketable inventories), gearing stood at 99.4%. With S$7.8bn of unutilised bank lines, readily marketable inventories of S$5.8bn and cash of S$2.6bn, Olam’s remains in a healthy liquidity position.

Share Price Drivers: Range bound near term. While Olam is showing signs of approaching a positive free cash flow to equity position, it is still generating suboptimal ROEs. Hence, we believe investors will adopt a wait-and-see approach before reassessing an Capital Expenditure investment in Olam. Thus, we believe the stock will trade range bound in the near term, with downside to the share price protected from Olam’s periodic share buybacks.

Key Risks: Natural disasters. As an agriculture player, Olam’s volume and product prices may be affected by unexpected weather-related disruptions and natural disasters.

Foreign currency volatility. As Olam has operations in various emerging countries, it may be negatively impacted by volatility ROE (%) in FX rates. This risk is predominantly related to Olam’s packaged foods business in West Africa which imports raw materials.

Interest rate risk. At net debt/equity (before adjustments for readily marketable inventories) of c.2x (end-FY16), Olam is vulnerable to significant spikes in interest rates. Nevertheless, Olam should continue to benefit from lower credit spreads in the near term due to Temasek’s majority ownership.

Forward PE Band (x) Company Background (x) Olam International is a leading agri-business operating across 25.0 the value chain in 65 countries, supplying various products +2sd: 21.4x across 16 platforms to over 13,800 customers worldwide. As a 20.0 +1sd: 18.9x supply chain manager, Olam is engaged in the sourcing of a Avg: 16.3x wide range of agricultural from the producing 15.0 -1sd: 13.8x countries and the processing, warehousing, transporting, -2sd: 11.3x shipping, distributing and marketing of these products, right 10.0 up to the factory gate of its customers in the destination 5.0 markets. Commodities that Olam is involved in include coffee, cocoa, sugar, rice, cotton, timber, nuts, spices and beans. Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

PB Band (x) (x) 3.0 +2sd: 2.4x

2.0 +1sd: 2.0x

Avg: 1.5x

1.0 -1sd: 1.0x

-2sd: 0.6x

0.0 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: Company, DBS Bank

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Page 6 Company Guide Olam International

Cocoa combined ratios Remarks 4.5 A key driver for Olam’s 4.0 Confectionary & Beverage segment is the cocoa 3.5 combined ratio/processing margins post the acquisition 3.0 of ADM Cocoa 2.5 While cocoa margins were 2.0 elevated last year, this should moderate in 2017 1.5

1.0

0.5

0.0 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16

Butter Ratio Powder Ratio Combined Ratio Source: Thomson Reuters, DBS Bank

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Page 7 Company Guide

Olam International

Income Statement (S$m) FY Dec 2014A 2015A 2016A 2017F 2018F

Revenue 19,772 19,053 20,587 21,120 21,522 Cost of Goods Sold (17,642) (16,974) (18,364) (18,677) (18,955) Growth underpinned by Gross Profit 2,131 2,078 2,223 2,443 2,567 recovery in Food and Other Opng (Exp)/Inc (1,208) (1,207) (1,410) (1,511) (1,550) Staples segment and Operating Profit 922 871 813 932 1,017 Edible Nuts with some Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 near term margin pressure on the cocoa Associates & JV Inc (5.9) 5.24 22.2 15.0 15.0 processing margins in Net Interest (Exp)/Inc (475) (449) (404) (443) (421) FY17 Exceptional Gain/(Loss) 285 (462) 1.64 (29.2) (16.2) Pre-tax Profit 726 (34.2) 433 475 595 Tax (96.1) (87.5) (94.3) (80.8) (101) Minority Interest (39.3) 15.3 12.2 (8.1) (9.9) Preference Dividend (16.8) (16.5) (33.6) (48.5) (37.5) Net Profit 574 (123) 318 338 446 Net Profit before Except. 290 339 316 367 463 EBITDA 1,126 1,137 1,189 1,304 1,392 Growth Revenue Gth (%) (1.3) (3.6) 8.1 2.6 1.9 EBITDA Gth (%) (2.2) 1.0 4.5 9.7 6.7 Opg Profit Gth (%) 1.8 (5.5) (6.7) 14.6 9.1 Net Profit Gth (Pre-ex) (%) 4.8 17.0 (6.7) 16.2 26.0 Margins & Ratio Gross Margins (%) 10.8 10.9 10.8 11.6 11.9 Opg Profit Margin (%) 4.7 4.6 3.9 4.4 4.7 Net Profit Margin (%) 2.9 (0.6) 1.5 1.6 2.1 ROAE (%) 7.3 7.3 6.0 6.8 7.9 ROA (%) 3.6 (0.7) 1.4 1.4 1.8 ROCE (%) 5.8 5.4 3.4 3.8 3.8 Div Payout Ratio (%) 25.5 N/A 51.5 48.9 37.0 Net Interest Cover (x) 1.9 1.9 2.0 2.1 2.4 Source: Company, DBS Bank

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Page 8 Company Guide Olam International

Quarterly / Interim Income Statement (S$m) FY Dec 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017

Revenue 4,761 4,981 4,738 6,106 5,804 Cost of Goods Sold (4,155) (4,442) (4,256) (5,510) (5,208) Gross Profit 606 539 482 596 596 Other Oper. (Exp)/Inc (348) (311) (367) (384) (287) Operating Profit 258 228 114 213 309 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc (0.6) 4.68 6.05 12.0 3.02 Net Interest (Exp)/Inc (99.4) (91.6) (100) (112) (140) Exceptional Gain/(Loss) (17.8) (1.1) 2.82 17.7 (2.0) Pre-tax Profit 140 140 22.5 130 170 Tax (31.0) (28.8) (7.5) (27.1) (34.0) Minority Interest 4.23 3.42 5.47 (0.9) 7.36 Net Profit 109 111 9.00 88.5 131 Net profit bef Except. 127 112 6.19 70.8 133 EBITDA 338 317 203 331 401

Growth Revenue Gth (%) (12.6) 4.6 (4.9) 28.9 (4.9) EBITDA Gth (%) 14.2 (6.3) (36.0) 63.4 21.0 Opg Profit Gth (%) 31.2 (11.6) (50.0) 86.3 45.4 Net Profit Gth (Pre-ex) (%) 76.0 (12.0) (94.5) 1,044.0 87.5 Margins Gross Margins (%) 12.7 10.8 10.2 9.8 10.3 Opg Profit Margins (%) 5.4 4.6 2.4 3.5 5.3 Net Profit Margins (%) 2.3 2.2 0.2 1.4 2.3

Balance Sheet (S$m) FY Dec 2014A 2015A 2016A 2017F 2018F

Net Fixed Assets 4,268 5,058 5,818 6,026 6,239 Invts in Associates & JVs 808 899 890 905 920 Other LT Assets 1,070 1,477 1,588 1,565 1,542 Cash & ST Invts 1,846 2,143 2,144 3,473 4,782 Inventory 4,988 6,692 7,414 7,164 7,011 Debtors 1,374 1,495 1,656 1,736 1,769 Other Current Assets 2,288 3,091 3,958 3,889 3,901 Total Assets 16,642 20,855 23,469 24,758 26,163

ST Debt 2,624 5,512 5,983 6,475 6,368 Creditor 1,373 1,754 2,201 2,047 2,077 Other Current Liab 875 1,067 1,457 1,457 1,457 LT Debt 7,217 6,782 7,688 8,661 9,227 Other LT Liabilities 260 421 506 506 506 Shareholder’s Equity 4,167 5,079 5,398 5,368 6,274 Minority Interests 126 241 236 244 254 Total Cap. & Liab. 16,642 20,855 23,469 24,758 26,163

Non-Cash Wkg. Capital 6,402 8,457 9,371 9,286 9,147 Net Cash/(Debt) (7,995) (10,151) (11,527) (11,663) (10,813) Debtors Turn (avg days) 33.4 27.5 27.9 29.3 29.7 Creditors Turn (avg days) 30.0 34.1 40.1 42.3 40.5 Inventory Turn (avg days) 99.0 127.5 142.9 145.2 139.1 Asset Turnover (x) 1.2 1.0 0.9 0.9 0.8 Current Ratio (x) 2.2 1.6 1.6 1.6 1.8 Quick Ratio (x) 0.7 0.4 0.4 0.5 0.7 Net Debt/Equity (X) 1.9 1.9 2.0 2.1 1.7 Net Debt/Equity ex MI (X) 1.9 2.0 2.1 2.2 1.7 Capex to Debt (%) 0.8 17.0 9.7 3.7 3.6 Z-Score (X) 2.1 1.7 1.7 1.7 1.7 Source: Company, DBS Bank

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Page 9 Company Guide

Olam International

Cash Flow Statement (S$m) FY Dec 2014A 2015A 2016A 2017F 2018F

Pre-Tax Profit 726 (34.2) 433 475 595 Dep. & Amort. 210 261 353 357 360 Tax Paid (65.6) (127) (48.4) (80.8) (101) Assoc. & JV Inc/(loss) 5.86 (5.2) (22.2) (15.0) (15.0) Chg in Wkg.Cap. (829) (996) (228) 85.5 138 Other Operating CF (143) 450 131 18.0 16.2 Net Operating CF (95.0) (451) 620 840 993 Capital Exp.(net) (81.7) (2,095) (1,320) (560) (566) Other Invts.(net) (7.8) 0.0 0.0 0.0 0.0 Includes redemption of Invts in Assoc. & JV 94.2 5.37 (65.9) 0.0 0.0 perpetual securities Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 Other Investing CF 8.07 0.01 0.01 0.0 0.0 Net Investing CF 12.7 (2,090) (1,385) (560) (566) Div Paid (190) (61.0) (184) (167) (191) Chg in Gross Debt 636 2,517 832 1,466 459 Capital Issues 90.5 915 5.40 34.2 650 Other Financing CF 114 (588) 227 (284) (37.5) Net Financing CF 651 2,783 880 1,049 881 Currency Adjustments 41.3 55.8 (113) 0.0 0.0 Chg in Cash 610 297 0.88 1,329 1,308 Opg CFPS (S cts) 30.2 20.9 30.8 27.2 26.9 Free CFPS (S cts) (7.3) (97.7) (25.4) 10.1 13.4 Source: Company, DBS Bank

Target Price & Ratings History

Source: DBS Bank Analyst: Mervin SONG CFA

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Page 10 Company Guide Olam International

DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends

Completed Date: 16 May 2017 11:50:07 (SGT) Dissemination Date: 16 May 2017 12:18:21 (SGT)

Sources for all charts and tables are DBS Bank unless otherwise specified.

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The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.

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The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

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Olam International

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 28 Apr 2017. 2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services:

3. DBS Bank Ltd, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from Olam International as of 28 Apr 2017.

4. DBS Bank Ltd, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for Olam International in the past 12 months, as of 28 Apr 2017.

5. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Directorship/trustee interests:

6. Nihal Vijaya Devadas Kaviratne CBE, a member of DBS Group Holdings Board of Directors, is a Director of Olam International as of 31 Mar 2017.

Disclosure of previous investment recommendation produced:

7. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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Page 12 Company Guide Olam International

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at [email protected].

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

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Olam International

United This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. Kingdom This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Bank Ltd 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888 e-mail: [email protected] Company Regn. No. 196800306E

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