Olam

*Result*

Olam announced result pretty much in-line with expectation. 3Q10 revenue was up 19% yoy to $7.3b, while net profit excluding exceptional gain was up 34.2% to $83.8m. On the back of a record 2Q10, this means 9M2010 net profit has grown 37%. Net profit margin has expanded from 2% to 2.3%...

However, as we previously mentioned - the focus is still on the cash conversion cycle which indeed lengthened from 105 days to 128 due to higher value of inventories as price of cocoa and cotton increased substantially during the period. Associate performance also remains weak. Therefore we expect price to be soften from the current high level PER of 21x FY10.

DB issues Sell rating on Olam with $2.10 target, less upbeat as Olam's high valuations already discount the positives and the M&A angle overplayed. Excluding exceptional gains in both 3Q10 & 3Q09, core net profit for 1Q10 rose 34.2% on year to $83.8m on improvement in all 4 business segments.

*Technical* -Olam is above the 200-days EMA suggesting uptrend is still intact. Resistance 2.57 ; Support @ 2.40 may be tested in the near term.