Olam

Olam: To invest US$240m in its first sugar milling asset in Brazil. Co will spend US$128.8m on acquiring Usina Acucareira Passos (UAP) and another US$115m over the nxt 5 yrs to improve its capacity and efficiency. UAP owns and operates a sugar mill in Passos, Brazil with 1.75m MT p.a and output of 200k MT of sugar per yr. Currently approx 75% of crushing comes from UAP's own cane plantations. Olam expects an IRR of 20% on this investment. Co highlighted that after expansion, transaction will be done at approx US$80/MT compared to other recent acquisitions at US$110-128/MT and Greenfield costs of approx US$125-150/MT. It is expected to be earnings accretive from the 2nd yr. Olam has other investments in sugar, two refineries, 1 in Indonesia and 1 in Nigeria and two other sugar mills in India. Among Wilmar, Noble and Olam, Olam is cheapest based on P/E valuations, currently at 10.2x P/E and is 22% down YTD compared to Wilmar at -26%. Noble is -3.9% YTD partly due to a lower base from the prev resigning of its CEO and unexpectedly poor results before the yr started.