Olam International

[Temperament]

Temasek up their stake, people kpkb.
Temasek cut loss, people kpkb.
Temasek remain status quo, people kpkb.
Ha... So how?
Temasek need a vested interest in Olam, our country grows nothing...

AH..... i agree most probably that's the reason "TooMUCHSick" become the 2nd largest shareholder in OLAM.
Just like NOL, why do SINK apore needs to have it's own National Shipping Line? How much money also no problem?
Q: Can you behave like "TooMuchSick"?

[Musicwhiz]

Thought the CEO said few days ago, that Olam didn't need to raise money within 5 months ?

You are right, they did not NEED to. They want to.

[wee]

Temasek up their stake, people kpkb.
Temasek cut loss, people kpkb.
Temasek remain status quo, people kpkb.
Ha... So how?
Temasek need a vested interest in Olam, our country grows nothing...

Haha... you spotted a trend there? Some just like to kpkb (it happens everywhere in the world, not just at VB, or in Singapore) .... it has nothing to do with temasek.

[cfa]

So is there any ground to sue MW ?

[CityFarmer]

I think people realise Olam has a solvency issue but forgot a crucial difference: though ROIC is the same but the liquidity profile of an asset heavy business model and one WC heavy is very different.

What it means is that if the figures are "real", Olam could scale back on their business and generate cash flows or her liabilities. It will definitely affect the business but can easily restore confidence first before moving on, unlike selling assets which may have a longer term strategic impact.

Obviously that doesn't solve the issue that olam is over leveraged and creditor confidence is hence important, but cash flow management is not as dire as some thinks. This rights issue is likely to address the former

Readily Marketable Inventories (RMI) or Liquid Hedged Inventories (LHI) is one key argument from Olam on its solvency issue.

Together with cash reserve, secured receivable and LHI, it is obvious that solvency is not an issue anymore.

Next question is the confidence level on the LHI. As outsider, it is difficult to access the worth of the LHI vs the "value" stated especially credibility of management is at stake.

[money]

Confidence in olam still look quite weak.

In the morning, it traded as high as 1.71, as of now (12.03pm), it is trading at 1.63, only 6 cents higher than yesterday.

Come to think of it, its rights issue isnt that attractive. You need to own 1000 shares of olam, to subscribe for 313 bonds (effective interest around 7.7%) , that comes with free warrants, but these warrants may be worthless if olam's intrinisic value is around $0.50-0.80 (assuming olam has a sound business). Exercise price of the warrants is USD 1.291, quite high.

Mr sunny should allow shareholders to buy 1000 bonds for 1000 shares of olam. That would really support the stock

[d.o.g.]

Readily Marketable Inventories (RMI) or Liquid Hedged Inventories (LHI) is one key argument from Olam on its solvency issue.

The Muddy Waters report points out that even if Olam is hedged when viewed from a consolidated viewpoint, the assets and liabilities do not necessarily match at each underlying entity. The physical inventories are held by the operating subsidiaries, but the offsetting/hedging contracts may be held by a different company. This creates a nightmare in a liquidation because there are so many companies in so many different countries. Think about what happened at AIG. AIGFP sold all sorts of insurance products and eventually caused the meltdown. But the underlying operating subsidiaries were perfectly sound. The same (or reverse) could be true at Olam.

If one cannot avoid this type of asset/liability mismatch, the sensible thing to do is to keep a strong liquidity buffer to avoid liquidation risk. But Olam cannot keep a strong liquidity buffer because its margins are so low - it needs high gearing to produce an acceptable return on equity. So Olam's business lives on a knife-edge. Investors who are willing to accept such risks should demand a commensurately high return i.e. the stock price should be very low in P/B and P/E terms to compensate for the very real risk of 100% loss.

[arthur]

ROUND 4 COMMENCES!
Place your bets gentlemen, place your bets!


Stop-Gap Bailout of Olam Validates MW’s Thesis
Published: December 3, 2012
Olam’s surprise announcement of an unusually structured US$750 million debt issuance validates our thesis that Olam is in danger of failing. Only in the case of our November 2010 report on Rino International have we had a faster confirmation of an investment thesis.


http://www.muddywatersresearch.com/wp-co...042012.pdf

[money]

ROUND 4 COMMENCES!
Place your bets gentlemen, place your bets!


Stop-Gap Bailout of Olam Validates MW’s Thesis
Published: December 3, 2012
Olam’s surprise announcement of an unusually structured US$750 million debt issuance validates our thesis that Olam is in danger of failing. Only in the case of our November 2010 report on Rino International have we had a faster confirmation of an investment thesis.


http://www.muddywatersresearch.com/wp-co...042012.pdf

Price is still too high, how to bet?

[wee]

Think about what happened at AIG. AIGFP sold all sorts of insurance products and eventually caused the meltdown. But the underlying operating subsidiaries were perfectly sound. The same (or reverse) could be true at Olam.

In AIG's case, the operating assets of the subsidiaries aren't really as liquid and readily marketable as the commodities that Olam has? Furthermore, subsidiaries of AIG are generally regulated and hence the assets can't be easily transferred or liquidated. While I would agree that the mismatch in the entities holding the assets vs the entities needed the cash may be an issue for Olam, I won't necessarily paint them in the same brush as AIG during GFC.