ABN Amro cuts Olam (O32.SG) target price to S$0.57 from S$0.69 to factor in lower earnings estimates; reiterates Sell rating. Cuts FY09, FY10, FY11 earnings forecasts by 6%, 4%, 5%, respectively to reflect lower volume growth expectations. Warns company could face cash shortage as capex and acquisitions will deplete cash reserves at time of credit tightening. Says gearing is a worry, expects net gearing to reach 3.4X in FY09, which is much higher than peers such as Noble (N21.SG). Adds difficult trade-financing environment to hit volume growth as company opts for cash on delivery for some transactions, could increase inventory levels, raise risk of trading losses on unhedged part of inventory. Shares +2.3% at S$1.35 vs STI +0.8%. (KIG)
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ABN Amro cuts Olam (O32.SG) target price to S$0.57 from S$0.69 to factor in lower earnings estimates; reiterates Sell rating. Cuts FY09, FY10, FY11 earnings forecasts by 6%, 4%, 5%, respectively to reflect lower volume growth expectations. Warns company could face cash shortage as capex and acquisitions will deplete cash reserves at time of credit tightening. Says gearing is a worry, expects net gearing to reach 3.4X in FY09, which is much higher than peers such as Noble (N21.SG). Adds difficult trade-financing environment to hit volume growth as company opts for cash on delivery for some transactions, could increase inventory levels, raise risk of trading losses on unhedged part of inventory. Shares +2.3% at S$1.35 vs STI +0.8%. (KIG)
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