Olam: Goldman upgrades to Buy from neutral, with a revised TP of $2.80 (from $2.85), implying 14x FY12E P/E vs the historical 9-40x range and 21x avg.
Notes Olam’s ROE dilution since 2009 was due to deleveraging and upfront invmts, but believes the co’s ROE may have bottomed in FY11, as mgt has not indicated further equity requirements under its current 5-yr (FY11-16) business plan. Going forward, Goldman expects maturing projects’ earnings contribution from prior yr invmts to drive steady ROE accretion, beginning with 2HFY12 earnings to mark the turnaround in returns.
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