HSBC starts Olam (O32.SG) at Overweight with $3.41 target price, according to Dow Jones.

HSBC says commodities trader broadening participation across value chain by adding hard assets, capabilities that offer strategic value to existing businesses: “This should enable Olam to capture wider margins while reducing its dependence on volumes to support earnings.”

Research house notes past M&A deals have delivered 75% higher net contribution than its legacy businesses, showing management’s ability to identify deals with potential for above-normal profits.

Adds that it expects earnings to surprise on upside as Olam expands supply chain expertise to intra-country trading, especially in geographies such as India, Latin America: “In addition, its food staples-biased product mix provides it with a stable base with protection against cyclical volatility, unlike its peers who deal with industrial commodities.”

Shares off 2.2% at $2.70.