Olam

Olam: UOB Kay Hian maintains Buy with $2.93 TP. House has key highlights from ASEAN conference. Olam mat attended house recently concluded ASEAN conference in Taipei. Key takeaways and issues raised:

Grp On track for medium-term net profit target of $1.0b. This is expected to be achieved through a combination of both organic and inorganic growth from accretive acquisitions. The targeted M&A over the next five years is 65 initiatives. The targeted ROE is 25% and mgt guided there will be no further equity dilution to meet this target.

Strategy to expand margins. Part of growth strategy entails raising its net margin to 4% or more by 2015, through expanding into valued-added midstream activities and venturing into higher-margin upstream activities.

Issue raised during conference was whether group could be stretched in terms of mgt capacity given extensive M&A targets (24 targeted initiatives in 2012, of which 17 had been executed). Mgt believes this is not an issue given deep management bench of 638, a sharp increase from 300 in 2008 to drive its expansion. In addition M&A philosophy also entails retention of mgt team of acquired co and this would further enhance Olam’s mgt bench.