Olam - OCBC Investment 2016-04-11: Investing US$150m in Nigeria

OLAM INTERNATIONAL LIMITED O32.SI

Olam: Investing US$150m in Nigeria

Olam International announced last Friday that it is investing US$150m in Nigeria to set up two state-of-the-art animal feed mills, poultry breeding farms and a hatchery to produce day- old chicks.
Olam calls the new venture - largest integrated animal feed mill, breeding farms and hatchery in Nigeria - a “win-win” for the company and Nigeria.

Olam also intends to utilize the wheat bran from its wheat milling operations, as well as maximize its sourcing networks to buy corn and soy from local farmers.
Recall earlier that Olam spent US$275m to acquire Amber Foods which owns the wheat milling and pasta manufacturing assets of the BUA Group in Nigeria – a move to strengthen its position as the number two wheat miller by sales volume there.
As before, moving downstream makes sense as it will create “demand” for its upstream origination business. However, any sizable benefits are likely to accrue from FY17 onwards at the earliest; hence we keep our forecasts unchanged for now.
We currently have a HOLD with a S$1.67 fair value on the stock.

Carey Wong CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-04-11

OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 1.67 Same 1.67