Olam

Olam: announced this morning it is acquiring a 100% stake in a U.S. peanut sheller, McCleskey Miles Inc (MMI) for US$176m. Maybank-KE views the transaction as positive strategically, but non-catalytic on financials in the near-term. MMI is the third-largest peanut sheller in the US with a market share of 12% and annual capacity of 250,000 Farmer Stock Tons. With two facilities in the heart of the US’s peanut-growing region in Georgia, strong franchise among growers and 20 buying points and farmer stock storage assets scattered over the southeast, it should contribute to Olam’s Edible Nuts midstream processing by extending its procurement and origination infrastructure to the group. Valuation wise, the 6x EV/EVITDA paid is also relatively attractive compared against Olam’s 10x for FY6/15E. Nonetheless, the FY6/15E bottom line impact, estimated to be +2-3%, will have limited impact on valuation. The house reiterates Hold with TP $2.52 based on 13x FY6/16E PER.