Olam (O32.SG) off $3.30 early high, last down 2.5% at $3.17 in robust volume; selling pressure comes after company announced investment in Gabon for US$1.3 billion ($1.7 billion) fertiliser plant JV, also CPO plantation JV.

Morgan Stanley, which has an Overweight rating, expected negative stock reaction “given the size of the investment and the business segment (beyond the core supply chain, in high capital-intensive segment).”

However, says risk-reward for Gabon investments “appear to be favourable in the medium term,” investments (especially urea manufacturing) value accretive from medium-long term perspective; “Hence, we would look for buying opportunities in the correction.” Adds, Olam’s indicative cost of urea production of under US$70/tonne, “would make the plant one of the lowest cost producers of urea in the world.”

Tips project can generate net margins of 30%-68%, ROE between 25% to over 100%.

Orderbook shows buyers lining up from here, good support at $3.15.