Macquarie downgraded Olam International to ‘neutral’ from ‘outperform’ and cut its target price to $1.60 from $2.40, saying some of the Singapore commodities firm’s projects are taking longer-than-expected to come through.
Olam shares were up 1.4% at $1.47 on Friday. But the stock has fallen more than 15% since short-seller Muddy Waters launched a scathing attack on the company’s accounting, debt and investment projects on Nov. 19.
"While we disagree with Muddy Waters’ assertion that Olam stands on the brink of insolvency, we do take their point that some of Olam’s new upstream and midstream projects have lagged expectations. In fact, as a group, the new projects had already missed our expectations in 2012 fiscal year," Macquarie said.
Muddy Waters discovered that Olam’s greenfield Nigerian sugar mill has been postponed indefinitely, Macquarie said, adding that this has been confirmed by Olam. A key urea project in Gabon also remains uncertain, Macquarie said.
Macquarie said its earnings estimates are 20-25% below consensus for 2013-2014 fiscal years.