Olam

Olam: Citi maintains Buy with $3.10 TP. Note that Olam and partner TCL have announced successful completion of due diligence on the required gas supply for its US$1.3b fertilizer project in Gabon. House expect Olam to work toward achieving project finance closure for this project by 3QFY12 alongside a previously indicated debt equity mix of 65:35 with the bulk of the equity investment expected across FY2012/2013.

Recall Olam updated its 5-year plan to 2016 with a target to reach Net Profit of US$1b (CAGR of 25-27%). While M&A continues to be key, house gave a strong message that it does not expect further equity raising to support these initiatives. Supply chain and mid/downstream processing profits are expected to make up 75% of profitability, with upstream profits accounting for 25%. (70% of current profitability is from its core supply chain activities.)

Add that fertilizer project is a key part of Olam’s Net Profit profile by 2016 and expects this project to generate EBITDA of US$300-350m at a steady state. House cite that exposure to food products a positive benefit.