Thursday, November 29, 2012

Olam (CLSA)

Olam: CLSA note that just 24 hours after Muddy Waters (MW) posted their 133page report, Olam has responded with their own 45pg refutation. Digging through the details, and house is happy to see an increased level of transparency within Olam’s announcements that believe would help address much of investors’ concerns. In their report, Olam focussed on explaining 4 key issues: their funding requirements, accounting issues, viability of business model, and the supposed difference between announced and recorded spending on acquisitions and capex. House see the explanation as providing quite a bit of detail into Olam’s day-to-day operations. Given Olam’s clarification and openness in providing such sensitive information, house believe this would have a positive effect on investor’s confidence in the co and think that the burning issues have mostly been answered in a relatively clear fashion. Meanwhile Olam note that the Co.is preparing another report which will go into even more detail to rebut the allegations. Many analysts appear to be assuaged by Olam’s counter-report but they expect volatility in the stock to continue at least for the short-term.

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