Thought I would use a quick look during the weekends to run through Muddy's 133 pager report on Olam and summarize it here. The post is merely a run through and does not imply the author is agreeing or attempting to distribute/disseminate the content of the Muddy Waters report.
Points are
Points are
- Capex/acquisition heavy with poor assets
- Crown flour mill (0.9% thin margin, cash burn)
- Capex attribution
- S$571M less investments that were annnounced
- S$996.2M of capex were not attributable over the last 4 years
- Accounting Issues
- 62.5% of non cash gains from negative good will from revaluations (SK Foods, tt Timber)
- Rest from biological gains (I.e you dont sell the trees but change your estimate of its values)
- Non cash accounting gains account for 37.9% of PAT from 2010 to 2012
- Financials
- Sept 2012, S$3.75B of debt due in 12 months despite S$1.38B in cash
- Firm consumed S$2.5B in operating cash flowfrom FY2009 to 1Q2013
- Significant margin account restatements, one over S$1B in 2008
- Significant impact of derivatives revaluation on profits (sensitivity up from S$3.8M to S$12M from 2011 to 2012 despite fall in value of derivatives)
- Undisclosed account changes (page 35-41 of Muddys report)
- Low rate of project and investment returns
- Nigeria export incentives and grant income flows to Olam but is not sustainable
- Solvency and liquidity
- Refinancing quantum of S$4.6B over next 4Qs
- FY 2012 has only 3 weeks of operating cash, over S$600M of cash out of S$1.1B are from withdrawals of broker margins. S$445.7M cash are from overdrafts at over 20%
- Recent quarters saw a withdrawal of cash from margin accounts and mentioned no need to maintain the account as they net off positions daily
- War of words
- Mentioned Olam was defensive, Olam advised Muddy to go long and work with firm. Muddy declined in a abrasive manner
- Muddy offered to pay for a debt rating on Olam
- Olam 45 page rebuttal HERE
Some takeaways
Most points were previously covered by others including CLSA previously and now further written in depth by Muddy which is well appreciated.
4 comments:
Hi, I came across your blog by chance. I believe I am much older than you and I thought I share my blog with you so that you can get a different perspective on Investment. I am basically a Technical Analyst but believe me when I was about your age, I also do a lot of Fundamental Analysis. I believe a chart reflected ALL THE INFORMATION, publicly available or otherwise so that saves me a lot of time. HAHAHA
I have also talked a bit on Olam,
http://hoosierdome.blogspot.sg/search/label/Olam
Interesting posts on this blog great information.
Excellent blog nice news stories
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