Olam

Olam: Announced 2Q11 results which were slightly ahead of estimates. Rev at $4.5b, +11% yoy and +39% qoq, while core net profit at $128.5m, -11.6% yoy and +376% qoq. Stronger qoq performance was largely due to seasonal patterns, while Net Contribution (NC) Margins increased slightly at 7.9% vs 7.6% yoy. Result brings 1H12 rev to $7.7b, +18.8% yoy and core net profit to $162.7m, -7.1% yoy.

Performance led by increase in total sales vol, at 2.6m mt, +14.5% yoy, where by grp’s relatively recession-resistant food category accounted for 77.6% of rev and 83.2% of vol. More importantly, this segment recorded strong Net Contribution growth of 32.1% over the previous period, led by grp’s Food Staples & Packaged Foods segment, which registered the highest vol growth across all its segments, driven by market share gains in Rice and Grains businesses in Africa.

Grp’s Industrial Raw Materials (IRM) segment accounted for 22.4% of rev and 16.8% of the vol in H1 FY2012, registering volume growth of 7.4%, however due to very difficult trading conditions, NC in this segment declined 29% vs yoy, as the segment is more recession sensitive.

Going forward, grp remains confident of prospects and will continue to focus growing its business, both organically in its supply chain core and through acquisitions in the mid and upstream segments of the value chain.

We note that grp’s balance sheet remains strong, with an adjust Net Gearing of 42%, while at current price, grp trades at an annualized 15.8xFY12E P/E.

Ratings as follow:
Citi maintains Buy with $3.10 TP
CIMB maintains O/p with $3.17 TP
Deutsche maintains Buy with $2.90 TP
UOB Kay Hian maintains buy with $2.93 TP