SINGAPORE (Jan 12): DBS Vickers Securities is keeping its “hold” recommendation and $2.01 target on Olam International, predicting investors will remain on the sidelines until the farm commodities supplier delivers on its free cash flow targets by 2016.

Olam is also integrating its recent acquisition of Archer Daniels Midland’s cocoa business.

“While we are cautious near term, there is significant upside to Olam’s earnings over the medium term if the company successfully executes on its plans,” DBS said after Olam announced a deal to buy wheat milling and manufacturing plants in Nigeria.

DBS says it expects the transaction to be earnings accretive for Olam.

However, DBS adds that investors may be reluctant to buy Olam shares as they shun the sector following the sentiment surrounding companies such as Glencore and Noble Group.

As at 2.59pm, Olam is flat at $1.70 in Singapore, while the benchmark Straits Times Index is down 0.4%.