Olam: the company says its balance sheet is much stronger now, with gearing currently below 2x vs 4.5x during the 2008 financial crisis, and it is not concerned about funding its business growth plans over the next 3yrs. Highlights that exposure to credit lines from EU banks is < 8%, and short term financing wasn’t an issue in 2008 and should not be an issue this time either.
Separately, Daiwa expects Olam to invest significant capital in acquiring midstream assets over the next yr, though this could adds risks to Olam’s earnings profile. Believes this will lead to a gradual derating of its valuation multiples (PBR, PER) but expects earnings growth and book0value accretion to offset and lift share price over time. The house maintain Buy rating and 6-mth TP of $3.05.
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