Olam Group - f.k.a. Olam International *Official* (SGX: VC2)

[Shiny Things]

Carson Block, the man behind Muddy Waters Research, gave a presentation on Olam overnight; he said he's shorting Olam and thinks it's going to zero. Bloomberg has the scoop:

Speaking today at the Ira Sohn Investment Conference in London, Block said Olam is booking profits on transactions before it’s clear how deals will work out over time. Olam is “heavily” indebted and aggressive in how it reports so-called biological gains on its investments, he said.

“It’s a leap of faith to think the company is being honest with its valuation” gains, Block told the conference. “We think the company will fail.” Recoveries for Olam investors will be “negligible,” he added.​

 

[l0nEr_]

Well he did initiate a STRONG SELL on New Oriental Education...
Research | Muddy Waters Research

The company is still alive... and has recouped most of the losses since his call..
New Oriental Education & Tech Grp (ADR): NYSE:EDU quotes & news - Google Finance

He has also been wrong on Focus Media Holding Ltd.
Focus Media Holding Limited (ADR): NASDAQ:FMCN quotes & news - Google Finance

Besides Sino-Forest, which is also disputable since nobody can really prove if its really a fraud (they just died coz it cant do businesses anymore), it seems like nothing else they have targeted came true.

 

[Some-one]

Interesting. As I have written in another post, I never find it a good idea for Olam to grow by M&A. Their business is complex and they are highly geared. By buying more and more companies, they are just making their business more and more complex without a good strategy.

 

[WindBoi]

i have friends telling me Olam is fundamentally good. i am not an expert in it.

 

[Futureskid]

A falling tide of waves will bring all boats down, and the worst boat will be drowned.... throw more stones to make it drown...

 

[testing1234]

trading halted!

 

[lion21]

Temasek lose money again

 

[Carnage]

Interesting. As I have written in another post, I never find it a good idea for Olam to grow by M&A. Their business is complex and they are highly geared. By buying more and more companies, they are just making their business more and more complex without a good strategy.

Isn't it true for commodities business? They just expand by acquiring other players or buying stakes.

 

[xtwis7]

Matching was in the range of 1.5x. 20 cents drop is huge.

 

[OngHuatHuat]

Matching was in the range of 1.5x. 20 cents drop is huge.

it is in the 1.4 range now, good luck!

I have to hold on my 5 digit loss liao...

 

[mrwirus]

it is in the 1.4 range now, good luck!

I have to hold on my 5 digit loss liao...

me too.. I bought it at $2++ sigh.. Big losses!

 

[OngHuatHuat]

i have friends telling me Olam is fundamentally good. i am not an expert in it.

I agree with that, but it is always the target for short sellers regardless of what happened. A bit fed up with it.

 

[OngHuatHuat]

me too.. I bought it at $2++ sigh.. Big losses!

it is fundamentally good, that is the thing that make me feel very sad. Loss money/make money, it will always kena shorted like mad. Appreciate the land value = inflated biological asset which is totally make sense because land costs has been increasing for the pass2-3 years like mad and olam owns large pieces of land in Nigeria/Africa. now people come questioning his accouting practice, say they inflate too much.

 

[OngHuatHuat]

me too.. I bought it at $2++ sigh.. Big losses!

haha, dun tell me you are thinking of getting out today?

 

[mrwirus]

haha, dun tell me you are thinking of getting out today?

of cos no! Super long term investor here liao.. No choice haha.. I can live with paper losses but not realised losses haha..

 

[OngHuatHuat]

of cos no! Super long term investor here liao.. No choice haha.. I can live with paper losses but not realised losses haha..

Bro, I tell you I am going to do something very risky, I am going to sell off another counter and add on at least 10 lots of olam depending on the price level later. I think I am mad liao....

 

[mrwirus]

Bro, I tell you I am going to do something very risky, I am going to sell off another counter and add on at least 10 lots of olam depending on the price level later. I think I am mad liao....

haha wish u good luck!!!

 

[OngHuatHuat]

haha wish u good luck!!!

UOB Kay Hian: Our View

Muddy Waters previously issued a report accusing Sino-Forest of fraud, following which the stock declined 74%. We note that the key difference of Muddy Water's comments on Olam is that it believes accounting is aggressive (rather than fraudulent). However, Block also said Olam will fail and recoveries will be "negligible."
Net gains on biological assets accounted for S$111m or 30% of FY12 (ending Jun-12) earnings.

Our assumptions for Olam's net gain from changes in fair value of biological asset for FY13, FY14, and FY15 are S$101m, S$93m, and S$61m respectively, accounting for 24%, 17% and 9% of group earnings. Olam has previous guided for the gains to decline as its almond orchards mature and start yielding.

Olam has also consistent maintained its position over the past two years that the gains on biological assets are a result of an increase in productive capacity and not changes in commodity price assumptions.

Biological assets account for 6.6% of assets and approximately 20% of shareholders equity. A significant part of these assets are from Timbercorp almond orchards in Australia which Olam acquired after the global financial crisis at distressed valuations. Other biological assets include dairy farming (e.g. NZFSU, Rusmolco).

While the accusations are serious, we believe Block's argument is inconsistent as the group will not fail even if the entire value of its biological assets is written off.
The stock is likely to see near term impact from this piece of news and could trade lower towards its Net Asset Value of S$1.35 before more clarity emerges.

However, we note that the group's balance sheet is well-positioned for share buybacks and is likely to re-commence the program should its stock price fall sufficiently.
Olam has requested its stock to be suspended pending clarification.

 

[OngHuatHuat]

haha wish u good luck!!!

Price drop of more than 20% I will hoot liao, which is around $1.40.

 

[starbugs]

I never quite like Olam, but to put in a fair word for Olam, Muddy Waters' argument seems to hinge on one main pivot on revaluation gains (which is not allowed in US GAAP, but allowed under IFRS).

Carson Blockhead could be just out of his depth regarding accounting rules, so all hope is not lost for Olam supporters.