Olam

Olam: posted poorer-than-expected 4QFYJun13 results. Net profit plunged 48% yoy to $56.8m, mainly due to higher tax charges and challenging market conditions. Olam booked tax charged of $50.6m in 4Q, representing a tax rate of 38%, compared to a net tax credit of $8.2m in the previous year, partly due to increased contributions from higher tax jurisdictions including the US, Australia, India, Indonesia and Brazil. Revenue however, grew 26% to $6.5b. Volume grew significantly across segments. But margins fell sharply in the Confectionary & Beverage segment (net contribution per ton -42% yoy) due to coffee rust disease across the Central and South American Coffee operations. Margins also declined in the Food staples & Packaged foods segment (-12%), due to continued underperformance of the upstream Dairy business, lower origination margins for grains in Australia and Ukraine, and lower margins in palm in the upstream investments in SIFCA and in the core supply chain trading business. Management declared 4cts dividend, unchg from last year. Olam said nearer term macroeconomic uncertainty and increased volatility could impact the agri sector. At the $1.46 last close, Olam trades at 10.2x P/E, 1x P/B. Nomura says the results are likely partially priced, as Olam shares slid 10% over the past week. Hence any knee jerk reaction to the results would provide investors with an opportunity to accumulate, as there are still significant assets which are gestating and not yielding, which should drive near term earnings growth. The house retains its Buy rating, with lower TP of $2.00 (from $2.30). CIMB upgrades to Neutral from underperform, with TP $1.58 (from $1.56). However, HSBC downgrades to Neutral from overweight, slashes TP to $1.64 (from $2.10). Credit Suisse maintains Neutral with TP $1.50 (from $1.65).