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Thursday, February 26, 2009
Olam International Ltd - Convertible bond exchange details
On 16 Feb, Olam had announced a convertible bond exchange offer at 78cts to the dollar. While the bond returns are not significantly different, the share conversion price for the new bonds are significantly lower, signalling management's keenness to place out new shares at S$1.656. The exchange would result in lower debt and higher interest expense. About 77% of the existing convertible bond holders have accepted the exchange offer. We view the exercise as non-core and maintain our core EPS estimates. Our FY09-11 reported EPS estimates, however, have been adjusted by +19% to -9%. We believe that the conversion price will serve as a price ceiling in the near term. Our target price remains S$0.97, based on 6.4x CY10 P/E. Maintain Underperform.
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