Lower trading liquidity sees OCBC cease coverage on Olam

Lower trading liquidity sees OCBC cease coverage on Olam

Jude Chan
16/08/16, 11:31 am

SINGAPORE (Aug 16): OCBC Investment Research on Monday says it is ceasing coverage on Olam International due to “severely reduced” trading liquidity.

The lower volume comes after Temasek unit Breedens Investment in March 2014 made a cash offer of $2.23 per share for Olam.

OCBC lead analyst Carey Wong says the offer was deemed fairly attractive then as the outlook for commodities remained muted.

“However, the offer has severely reduced Olam's trading liquidity since then, and to better allocate internal resources, we are ceasing coverage on the company,” Wong says.

This comes despite Olam reporting 1H16 revenue grew 6.7% to $9742.8 million, meeting 46% of the research house’s full-year forecast, while PATMI jumped 73% to $228.6 million.

Olam declared an interim dividend of 3 cents per share, compared to 2.5 cents per share in 1H15.

In addition, Wong says he is “still upbeat about [Olam’s] long-term prospects”.

“Despite the recent volatility in agri-commodity prices, management believes that the long-term trends in the sector remain attractive, and Olam is well positioned to benefit from it,” he says. “It now has the strong balance sheet and liquidity position to pursue profitable growth.”

As at 11.17am, Olam is trading 1.3% higher at $1.95.

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