Olam

Olam: +3.5% at $1.605, the best-performing STI component. Morgan Stanley notes, while its fiscal 3Q earnings look weak, and possibly 4Q also, from its non-food segment's drag, the stock's recent correction reflects this. Views May's 30% drop as overdone. The house finds valuation attractive and the food business solid; adds FY13's outlook is better on solid food growth, with key initiatives scaling up well, while the non-food segment's margins will normalize. Acknowledges that near-term stock performance may be stunted due to expected weakness in 4Q, but thinks investors will gradually shift focus to FY13, on which the risk-reward skew looks favorable. The stock trades at 10.9X forward PER, vs its 17X two-year average, and at an all-time low 1.15X P/B, below the 1.5X global-financial-crisis trough. MS keeps an Overweight call, but cuts TP to $2.50 from $3.40 after lowering its FY12 profit-after-tax forecast by 20% and lowering ROE assumptions. The $1.63 10-day moving average may cap gains.