Indian FTrash Laughing to Bank With Sporns' $440M!

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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published June 2, 2009

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Temasek to plonk $437m into Olam
Kewalram group, Verghese to back deal; some of the funds may go into fresh acquisitions

By CHEW XIANG
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(SINGAPORE) Temasek Holdings is investing $437.5 million in Olam International, the listed commodities supplier said yesterday. Analysts called the Singapore investment company's foray into commodities an expected diversification into a less risky sector.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD>Mr Verghese: 'Obviously we expect Temasek to be a long-term strategic investor' </TD></TR></TBODY></TABLE>'It'll be taking a closer look perhaps at commodities; their primary emphasis will be on diversification,' David Cohen of Action Economics told Bloomberg. 'They were burnt by their exposure to the financials.'
Breedens Investments and Aranda Investments, two wholly owned Temasek subsidiaries, will pay $1.60 a share for about 273.46 million new shares in Olam - or about 13.76 per cent of the post-issue share capital of the company. If the deal goes through, Temasek will be the second-largest shareholder in Olam, a supplier of 20 mostly agricultural or food products to 6,500 customers worldwide.
David Heng, managing director, investments, at Temasek said the deal 'fits well with our investment theme of supporting emerging global champions'. Temasek owned a significant chunk of Olam from 2002 but sold off its entire 4.86 per cent stake in March 2006 for $118.6 million at $1.57 a share.
Speculation has been rife that the appointment of Charles Goodyear, former boss of mining group BHP Billiton, as Temasek CEO from October could signal a shift into commodities and away from investments in financial instruments.
Chris Sanda, senior investment analyst at Daiwa Institute of Research, said: 'Temasek tends to go through themes in investing and Olam has done a very good job in explaining its themes to them.' He said the company's earnings tend to be more resilient as soft commodities are less affected by global demand cycles, while growing middle-class consumption of food products should keep volumes buoyant. Raising cash from equity also makes sense as term-debt markets are still frozen, Mr Sanda said.
Olam chief executive Sunny Verghese said: 'Obviously we expect Temasek to be a long-term strategic investor. We know Temasek is interested in this space and they believe we have a clear strategy and a good management to execute it.'
Temasek has requested and will be given a seat on the board, he added. 'They did very well in their first investment in Olam and I'm sure they will expect to do as well in this investment.' Analysts attributed the earlier sale to profit-taking.
Mr Verghese said 80 per cent of the money raised will go towards return-on-equity accretive acquisitions as well as organic growth.
'We have a very active and deep investment pipeline of about 13 or 14 targets and we will start putting this money to work in the next three to six months,' he said, adding that the funds raised would not be used to reduce the company's gearing. The company has some $3 billion of debt, mostly for working capital purposes.
The deal is subject to shareholder approval. The Kewalram group and Mr Verghese, who together hold 32 per cent of existing shares, have undertaken to vote in favour of the share placement. Other members of Olam's management hold another 9 per cent of the company and are likely to support the placement as well.
While the issue price of $1.60 is at a 17 per cent discount to the volume weighted average price of $1.937 last Friday, the stock rose 22 cents or 11.3 per cent to $2.16 yesterday following the early-morning announcement.
'This will enable them to go after deals they couldn't go after before,' said an analyst for a foreign brokerage.
Olam traded as low as 88 cents a share last December but has recovered strongly since.

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[makapaaa]

There goes the 154th propaganda again. Did these dogs not bark that Ho Jinx's shopping bag was superlative the same time last year?


<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published June 2, 2009

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Olam offers Temasek steady earnings stream

By CHEW XIANG
<TABLE class=storyLinks border=0 cellSpacing=4 cellPadding=1 width=136 align=right><TBODY><TR class=font10><TD width=20 align=right></TD><TD>Email this article</TD></TR><TR class=font10><TD width=20 align=right></TD><TD>Print article </TD></TR><TR class=font10><TD width=20 align=right></TD><TD>Feedback</TD></TR></TBODY></TABLE>JUST over four years ago, Temasek Holdings went through a Great Rebalancing. In March 2005, half of its assets were investments in Singapore; a further third was in OECD countries including Japan; and about a fifth in the rest of Asia.

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</TD></TR><TR><TD bgColor=#fffff1><TABLE border=0 cellSpacing=0 cellPadding=0 width=124 align=center><TBODY><TR><TD vAlign=top>It is a relatively small deal, but it is a symbolic one. It means the Great Rebalancing is under way again.
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</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>After a review, Temasek said its long term target was to have a third of its portfolio in each geographical region. It started selling off Singapore assets, while spending billions to acquire stakes in Asian companies (including $3 billion in the ill-fated Shin Corp deal), as well as banks and telcos abroad.
Among the assets the Singapore investment company divested then to fund its buying spree was a 4.86 per cent stake in Olam International. It got about $120 million - $1.57 a share - in March 2006 and likely made a big profit. Olam had listed at 62 cents the year before and Temasek, a shareholder since 2002, had probably gone in at a price far below the public launch price.
After what has happened in the past year, Temasek now has a new long term target. Last month, it said it wanted to focus more on Asia and emerging markets such as Brazil and Russia, with reduced emphasis on developed countries like the US and Europe. The new strategy was dubbed 10-20-30-40 - 10 per cent of its portfolio was to be allocated to Latin America, Russia and Africa; 20 per cent to OECD countries; 30 per cent to Singapore; and the remaining 40 per cent to the rest of Asia.
The rebalancing is not only geographical. Analysts say the appointment of former BHP Billiton boss Charles Goodyear as Temasek CEO from October could mark a shift in its investment strategy, away from financials and into commodities.
Yesterday, Olam said it would sell just under 14 per cent of the company to two Temasek subsidiaries for $437.5 million by issuing new shares. It is a relatively small deal, but it is a symbolic one. It means the Great Rebalancing is under way again.
Olam represents both a geographical and sectoral spreading of risk. If the deal goes through, Temasek will be the second largest shareholder of a commodities supplier which has a presence in all four of its targeted regions. As well, Olam's core focus - so-called soft commodities, or agriculture and food products - means earnings are likely to be less volatile compared with those of suppliers of commodities such as energy, minerals and metals - or even those of banks, shipping companies, airlines and other sectors to which Temasek has already big exposure.
That is a welcome diversification. Temasek reportedly lost $58 billion from end March to November last year. Just over half of that was in the value of Singapore-listed Temasek-linked companies. The rest were lost in unfortunate investments in financial institutions - reportedly US$3 billion alone from selling out of its Bank of America stake earlier this year.
But one problem with the rebalancing thesis is that the company is still very much a Singapore play and despite its significant international presence isn't much of a diversification from what Temasek already has. Its earnings may be stable but its shareholder returns correlate very closely to an index that Temasek is already heavily exposed to. Olam's beta coefficient against the Straits Times Index is 1.16 over the last year, and 1.23 since it was listed in 2005, according to Bloomberg data.
Despite this - and the wild stock market gyrations of the past nine months - Olam has still managed total returns of over 20 per cent since March 2006 - compared with minus 5.5 per cent for the STI. Olam will likely not be able to repeat for Temasek its impressive returns in its earlier years. It does not pay big dividends, while analysts' consensus target price for the next twelve months is around $1.72 a share, not far above the $1.60 Temasek will be paying for its stake if the deal is approved by shareholders. Yesterday, the stock closed at $2.16 - a rich 13.8 times historical earnings, and above the STI's 12.6x.
But what it can provide is a steady stream of visible and defensive earnings, married to a convincing consumption story. The world's middle class will continue to grow, and they will want more to eat and that will boost volumes and thus earnings for the likes of Olam.
The investor is long familiar with the company. Olam boss Sunny Verghese is chairman of IE Singapore; independent director Wong Heng Tew is also an advisory director of Temasek. It seems a fairly safe investment for Temasek to stomach.

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