Olam (UOBkayhian)

Olam: UOB Kay Hian note that Olam receiving support from Temasek's vote of confidence, may make the stock "difficult to short," similar to co's receiving Chinese state support, noting indications stock lenders also will need to recall their holdings from short sellers to subscribe to the rights issue of bonds and warrants. With Temasek's stamp of confidence and new financing as good as secured by early next year, concerns raised in recent weeks on Olam's solvency are likely to be lifted. Add that Olam appears willing to take a short-term hit on finance costs to demonstrate its access to capital markets and secure financing; "the extension of Olam's debt maturity profile once the rights issue is completed would give more confidence to their lenders. House cuts its target to $2.32 (cum rights) from $2.38 after lowering its FY13 earnings forecast by 2% to $418m, mainly on higher finance costs due to higher debt-raising costs and higher interest rates on the higher proportion of long-term debt. It keeps a Buy call. Valuations on a P/B basis remain attractive at close to minus-two standard deviation levels and below global financial crisis lows.