Olam

Olam: HSBC Global Natural Resources Conference takeaway.
Mgt continues to have a positive outlook for FY12 despite global volatility given its food staples biased product mix. While crop harvests visibility is limited at this point given seasonality, working capital intensity should come off only marginally as volume growth will partially offset lower commodity prices.

To update on recent investments,
i) the Gabon fertiliser project is targeted to achieve financial closure by 3QFY12 and start production mid-2014,
ii) the Ivory Coast mechanical cashew processing plant is set for an end-Dec 2011 launch,
iii) the plant in Nigeria has entered the trial phase,
iv) the Ghana wheat mill is set to begin production by end-Nov 2011.

In balance sheet terms, the Group has seen no pullback in trade finance facilities or bilateral credit despite the global environment. Mgt is looking to term out its debt profile to the longer end to match the higher fixed assets mix. HSBC believes Olam is set to deliver secular growth from its M&A and Greenfield project driven strategy. Keeps Overweight with peer based TP of $2.99.