Olam

Olam delivered a strong FY10 with revenues up 22% to S$10.5bn while net profit (ex-EI) grew 49% to $272m beating consensus of $246m. 4Q10 net earnings doubled to $92.3m. The strong performance in FY10 was driven by a 22.5% increase in sales tonnage & margin expansion from 2.1% to 2.6%. Net contribution was up in all 4 major divisions. Commodity financial service, which is a new category, contributed $25m to PBT.

Olam’s strategy of expanding mid-stream & upstream have paid off handsomely with investments in TimberCorp (almonds, Australia) & Nauvu (palm oil, rubber, Africa) contributing to profit growth. The group remains optimistic on prospects & highlights that some of the 17 acqns pursued since 2007 are still in gestation & yet to hit peak cycle. Olam’s upstream and midstream segments contributed to 34% of group EBITDA in FY10, up from 18% in FY09.

The impressive results have boosted confidence in the mgmt’s guidance of 15% growth till 2015. Stock is currently trading at 16x FY10 P/E dropping to 14x in FY11. Most brokers have buy calls with target range of $2.68-4.25 while KE has a TP of $3.10. Co has declared final DPS of 2.5¢ raising full yr DPS to 4.5¢.