Olam

Olam: DBS Vickers reckons Olam is not out of the woods yet. House expects 4QFY12 core earnings to rise 12% qoq to ~$90m on its almond harvest and coffee origination, but the industrial raw-materials segment should offset other segments' gains, with its net contribution possibly dropping 71% yoy on lower cotton and timber volumes. Highlights there is potentially further downside risk to 4Q12 expectations from weaker than expected US/European dehydrates/cocoa/chocolate/cotton demand. Adds, it may take longer for Olam's free-cash-flow to turn positive. While it likes Olam's growth prospects and strong management team, the group has been in negative free cash flow, given its heavy investments over the last 5 years amid skittish market conditions. It now expects positive FCF next year, but much will depend on the level of capex outlay needed for potential M&As. DBS keeps its Hold rating with $2.00 target.