Olam

Olam: Maybank-KE upgrades to HOLD and $1.57 TP, based on 12x FY14F PE, 25%. Trading at historical low valuation, the house believe the negative news has largely priced in. Current 0.9x P/B ratio should provide good share-price support. But still concern about Olam’s slower earnings growth due to scale-back in capex and its vulnerability to rising cost of debt. Olam’s weak balance sheet and increasing exposure to politically and economically unstable geographies, such as Africa, where risk premiums are higher, reduce justification for valuation discount to narrow.