SINGAPORE (Dec 14): OCBC is keeping its “hold” call and target price of $1.86 on Olam International following the company’s recent announcement that it is expanding into the animal feed business in Nigeria.

This new business area involves activities such as setting up poultry and fish feed mills, hatcheries to produce day-old-chicks. Olam expects the commercial feed market to grow at more than 10% compounded annual growth rate over the next five years, led by emerging markets.

OCBC sees Olam’s move as complementary to its existing business along the entire agricultural food supply chain, capturing extra margins along the way. “Olam can tap on its existing strengths in origination, which includes extracting raw material cost efficiencies, sharing of port infrastructure, sourcing arbitrage, trading, ocean freight and risk management,” the brokerage states.

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