Muddy Waters releases report on Temasek's Olam - shares plunge 6%!

[watchman8]

Re: Olam

Question is what TEMASEK will do! LOL
I bet below that price level is where Temasek is patiently waiting to GOBBLE up Olam! LOL

The company man is back. So the new spin now is on giving hope that temasick will take over this firm. Buying time huh?

Question: given that olam mgt has screwed it up big time by gross financing mismanagement, acquiring high leverage and questionable assets, in which mw is merely the messenger and agitator, why would temasick trust that olam will deliver value in future? A private apology and weeping session with whore jinx?

The whole country is watching because this is sgx listed firm. Temasick can't make a due diligence oversight here, else the political repercussion is going to be felt in next election.

 

[Zatoichi]

Re: Olam

... what Temasek CAN do after taking over.

They can OWN all those non-Singapore farmlands and EAT up all the FOOD produced from those farmlands! LOL

But I bet Temasek can't finish all the food themselves, so rather than waste the food, they'll probably have some compassion on us poor, starving Singaporeans and share a bit with us! LOL

Temasek is not THAT cruel after all, right? LOL

Besides, they'll still need SOME Singaporeans to survive and continue slaving away for the PAP, right? LOL

...new spin now is on giving hope that temasick will take over this firm. Buying time huh?

Only for Temasek to buy IF it drops way below S$1.

Those who buy/sell/short anywhere between S$1 and S$2 are probably going to have a mental breakdown from all that whipsawing! LOL

Question: given that olam mgt has screwed it up big time by gross financing mismanagement, acquiring high leverage and questionable assets, in which mw is merely the messenger and agitator, why would temasick trust that olam will deliver value in future?

I thought you already know?

They're gambling with the so-called "taxpayers' money" of so-called "Singapore Citizens", right? LOL
No pain, no gain, right? LOL
And if lose, at least still got food from Olam's farmlands to eat, right? LOL

A private apology and weeping session with whore jinx?

And her reply, while hugging them like a mother would hug her baby, might be:

"Don't cry, don't cry...Mummy's here... everything will be alright..." LOL

The whole country is watching because this is sgx listed firm. Temasick can't make a due diligence oversight here, else the political repercussion is going to be felt in next election.

Temasek, especially since it's a private company not listed on any stock exchange, will probably cook the books and in 3-4 years' time, overall portfolio assets will probably be way above S$200 billion by then! LOL

And together with GIC's assets, overall GIC/Temasek assets should be way above the current US$400 billion:
http://en.wikipedia.org/wiki/List_of_countries_by_sovereign_wealth_funds

And if PAP wins 49% or less of the seats, they'll just form a coalition government with the WP.
That's when we'll see the true colours of the WP; whether or not they're just existing for "cosmetic" purposes to maintain the facade of "democracy"; "cosmetic" being the word Francis Seow used, if I recall correctly from this video (which I must try to watch again):

[video=youtube;pzOLJE2ysNw]http://www.youtube.com/watch?v=pzOLJE2ysNw[/video]

 

[Merl Haggard]

Re: Olam

Do you know how many shares Michael Lim bought and at what price?

Michael Lim 200,000 at 1.55.

Sorry for my typo error.....Ah Neh bot 1m at 1.54.

 

[Merl Haggard]

Re: Olam

How did you manage to short? through CFD?

Yes. We started at around 1.78.

 

[Clone]

Re: Olam

This thread is too bearish.

 

[watchman8]

Re: Olam

They can OWN all those non-Singapore farmlands and EAT up all the FOOD produced from those farmlands! LOL

First of all, are these farmlands going to yield as much food as olam said they will? Seems like too many of bond holders and banks are having doubts.

Second, why would temasick want to bet so much on olam? They could spread more money to other players to achieve same outcome at much reduced risk.

Those hoping for temasick to be the knight in shining armor coming to olam's rescue better consider harder.

 

[Zatoichi]

Re: Olam

First of all, are these farmlands going to yield as much food as olam said they will?

Do you think Temasek cares that much? LOL
As long as enough for Singaporeans and some foreign cronies, that should be good enough, right? LOL

Second, why would temasick want to bet so much on olam? They could spread more money to other players to achieve same outcome at much reduced risk.

I'm not sure, maybe Sunny is one of their favourite cronies? LOL
So die die must help lor! LOL

Those hoping for temasick to be the knight in shining armor coming to olam's rescue better consider harder.

I think only Olam is hoping for Temasek to rescue Olam! LOL

Small minority shareholders, unless they are so hopelessly devoted to Temasek/PAP, should just stay away from stocks in general, in my opinion.

Personally, I would rather invest my money in gold, silver and black gold (i.e. oil) ONLY.
Just look at their charts for the past decade and you'll see what I mean.
Of course, don't use too much leverage.

 

[Merl Haggard]

Re: Olam

Interesting comments from a former Temasek Senior MD:


http://www.bloomberg.com/news/2012-12-06/olam-should-reduce-debt-and-increase-transparency-dee-says.html


Michael Dee, a former senior managing director at Temasek Holdings Pte, called for the company to sell stock.....“Olam made a strategic error in saying equity was not
needed until 2015. It needs equity now," said Dee, who worked at Temasek from 2008 to 2010, in an article published in Singapore’s Business Times newspaper.

Michael Dee joined Temasek after serving as the Southeast Asia chief executive officer for Morgan Stanley.

 

[DogVader]

Re: Olam

I am going to short Olam shares in the name of fun tomorrow.

 

[watchman8]

Re: Olam

Interesting comments from a former Temasek Senior MD:
Michael Dee joined Temasek after serving as the Southeast Asia chief executive officer for Morgan Stanley.

sounds like he has an axe to grind?

 

[Confuseous]

Re: Olam

The latest Temasek-backed transaction raises significant issues, as it is extremely expensive debt and equity capital, capital that Olam spent a week telling the market it didn't need. The package of US$750 million of five-year debt and so-called "free" warrants are hardly free as they have tremendous value. Black-Scholes models have valued these warrants to be worth an estimated US$127 million. Since Olam's proposed US$750 million of debt is priced at 95 per cent of par, the proceeds, before fees, are actually US$712.5 million including the warrants. By backing out an estimated warrant value of US$127 million, the true bond value is actually only US$585 million, equal to 78 per cent of the original bond value. Thus, the true yield on the bond is not the 8 per cent that Olam would like investors to believe, but rather a whopping 13 per cent. Given the generous nature of these terms and Temasek's commitment to fully take up the rights issue, one has to wonder why Olam is paying US$15 million in underwriting fees to the banks who are taking no risk. If you back out those fees, the cost of this debt is an even more eye-popping 13.7 per cent.

In other words, Olam is offering existing investors a bond yielding an estimated 13 per cent and at-the-money warrants which can only be exercised in years 4 and 5. No wonder Temasek wants to underwrite the entire deal - this is the sale of the century, just in time for Christmas. But before shareholders get too excited about shiny packages under the tree, they should consider that this is just a left-pocket, right-pocket deal. The shareholders are paying for this lavish set of terms. The real losers are the bondholders, not to forget the investors who only a few months ago bought the US$275 million perpetual preferred shares issued at 100 per cent that are now quoted at 82 per cent. Their already over-leveraged securities just got more risky and they get no benefit from this package. And of course any investors unable to take up their rights will see them go to Temasek, who has no shortage of capital.

Olam should declare if management shares are on margin or pledged. While in the past, it could perhaps be argued that this is a personal matter, with so many questions hanging over the company, management needs to treat its shareholders as partners and declare if any shares are encumbered and could be force-liquidated at a given price point and if so, what that is.

Olam should also disclose the timeline of the events leading up to the announcement of the Temasek underwriting as the storyline has been shifting. Olam claimed this was its idea over the weekend and had the bankers take it to Temasek. Yet Olam also said last Friday that the CEO and two board members bought significant shares in the company. Did the idea emerge after those purchases were made and if so, when and how? There is no need to have questions about possible conflicts of interest when a simple timeline can put the issue to rest.

BY: Michael Dee, an investment banker for over 30 years, was Morgan Stanley's regional CEO in Singapore and a Senior Managing Director of Temasek Holdings from August 2008 to April 2010. He has no position in any Olam securities.

 

[Merl Haggard]

Re: Olam

10-point plan of tough love for Olam

It needs to restore credibility and take definitive actions for a healthy future



Published December 07, 2012 COMMENTARY

By Michael Dee



1) End the war of words. Anyone reading Muddy Waters' 133 page report will see a credible work of research. The market has not been impressed with Olam's attempts to discredit Muddy Waters with ad hominem attacks and lawsuits. What's needed now are strong actions, not words.

2) Raise equity, not more debt. Olam made a strategic error in saying equity was not needed until 2015. It needs equity now. Its net gearing of 248 per cent is well in excess of industry norms and the US$750 million new debt makes matters worse and adds USD/SGD foreign exchange risk to boot. Olam should cancel the egregiously expensive debt issue and execute a meaningful equity rights offering giving the KC Group, Temasek and management the opportunity to take up rights that are unsubscribed, if any. This will underpin Olam's equity capital while demonstrating the commitment of its largest shareholders and management. Selling 13 per cent debt with at-the-money warrants is a sign of desperation.

3) Immediately stop the capital expenditure programme. This is essential as the supply of cheap debt is over. Olam's board must stop the acquisitions, conserve cash and prove the value of the acquisitions to date.

4) Focus on generating positive cash flow as soon as possible. Rule No 1 of battlefield triage is to stop the bleeding. Negative cash flow while executing a capex and acquisition programme with ever increasing leverage is untenable.

5) Sell secured receivables. Olam has said that its secured receivables are as good as cash. It should demonstrate that by selling a meaningful amount, raising cash, paying down short term debt, creating liquidity and convincing the market of these receivables' cash-like properties.

6) Draw down a portion of both committed and uncommitted bank lines. Olam is currently closed out of the fixed income capital markets and the availability of its undrawn, fully committed and uncommitted facilities remains in question. In light of Olam's significant upcoming 2013 debt maturities, showing the availability of committed and uncommitted facilities would boost market confidence.

7) Get the debt rated. Olam has raised billions from the Singapore debt markets with no independent rating of creditworthiness. An independent assessment of Olam's credit is required for investors, many of whom are individuals. The argument that others in the industry do not have a rating is untenable and specious. Olam's net gearing of 248 per cent far exceeds Noble's at 107 per cent and Wilmar's at 88 per cent. The MAS and SGX, whose silence have been deafening, should also publicly back this initiative.

8) Do not buy back stock. A stock repurchase programme burns valuable cash, increases leverage and will not impact Olam's share price. In fact, it would likely only further worsen the precipitous declines in its bond and preferreds prices.

9) Declare if management shares are on margin or pledged. While in the past, it could perhaps be argued that this is a personal matter, with so many questions hanging over the company, management needs to treat its shareholders as partners and declare if any shares are encumbered and could be force-liquidated at a given price point and if so, what that is.

Olam should also disclose the timeline of the events leading up to the announcement of the Temasek underwriting as the storyline has been shifting. Olam claimed this was its idea over the weekend and had the bankers take it to Temasek. Yet Olam also said last Friday that the CEO and two board members bought significant shares in the company. Did the idea emerge after those purchases were made and if so, when and how? There is no need to have questions about possible conflicts of interest when a simple timeline can put the issue to rest.

10) Don't rely too much on Temasek in future. Too often the market believes that when Temasek is invested for over 15 per cent, they will underwrite problems that occur and banks, investors, management, and boards can then get sloppy and lazy. As a professional investor, Temasek will do what is in its commercial interest and those who bet on additional bailouts may one day have a rude awakening, as has happened in the past. The US$750 million debt and warrants package is one sweet deal for Temasek and is not being done for charitable reasons.

Olam, as a trading business, has failed to grasp the realities of the post-financial crisis era. Today balance sheets, accounts and financing must be beyond reproach. Olam has not achieved this, but has continued to travel a dangerous path in recent years fuelled by readily available credit. It has a fiduciary responsibility to its equity and debt investors to respond with a credible and thoughtful plan of action to preserve and enhance value.

Olam has paid an extremely dear price to Temasek to buy some time. How it proceeds from here will be the existential question.

Michael Dee, an investment banker for over 30 years, was Morgan Stanley's regional CEO in Singapore and a Senior Managing Director of Temasek Holdings from August 2008 to April 2010. He has no position in any Olam securities.

 

[Confuseous]

Re: Olam

Governance and management

Governance and management are also complicated by the very business model which Olam touts as a key source of its competitive advantage. In particular, it claims a "differentiated core supply chain business" which enables it to "out-origin" its competitors by "sourcing directly from the farm gate". This is a contributor to Olam being seen as a "black box" because its network of suppliers is quite mind-boggling.

Olam's latest annual report disclosed that its total sourcing volume was 10.675 million tonnes, made up of 24 per cent, 48 per cent, 18 per cent and 10 per cent respectively from the Americas, Asia and Middle East (A&ME), Africa and Europe. It sourced from 3.4 million farmer suppliers in Africa. This compares with 7,400 and 111,300 farmers in the Americas and A&ME. Average sourcing volume for Africa per farmer was about 0.5 tonne, compared to about 309 and 42 tonnes for the Americas and A&ME respectively. In terms of per hectare, it was 0.53 compared to 1.51 and 26.1 respectively. Olam has to deal with a large number of relatively small farmer suppliers in Africa. In a way, Olam adopts a contrarian supplier strategy compared to many other companies in other businesses - which is to reduce the number of suppliers it deals with directly in order to improve supplier management and relationships.

Therefore, a fair question to ask is this: How does Olam manage such a complex supplier network? Is the so-called competitive advantage truly translatable in the long run into better performance than its competitors?

Olam places a lot of emphasis on risk management based on its disclosure in the annual report, and it has to because it has to deal with many risks, including those relating to the nature of its business, extensive use of derivatives, high leverage, aggressive expansion, accounting, its "differentiation strategy", and doing business in emerging markets. It has also adopted many of the "best practices" in the Singapore Code of Corporate Governance.

However, the most important corporate governance (and management) issues for Olam have to do with its subsidiaries and operations overseas, and with its supply chain. The robustness of its process in evaluating capital expenditure and acquisitions, including post-implementation reviews of such expenditures, would also be an important part of its corporate governance and management. Other issues that are important include how it deals with fraud and corruption risks, and risks associated with environmental and social issues, especially in emerging markets. Indeed, the MW report cites some news reports criticising Olam for its practices in certain markets and questions its dealings in some of these markets.

Olam may not like the messenger, but it should not completely ignore the message. Fair value accounting may have contributed to the scrutiny it is facing, but there are also other issues which it will need to focus its attention on in order to regain investor trust.

By Mak Yuen Teen The writer is an associate professor of accounting at the NUS Business School where he specialises in corporate governance

 

[lifeafter41]

Re: Olam

At 300k plus each is chicken feed to them.

 

[Zatoichi]

Re: Olam

sounds like he has an axe to grind?

Letters & Statements - Media Centre - Temasek
http://www.temasek.com.sg/mediacentre/medialetters?detailid=18281

Views and opinions expressed by former Temasek employees and management
7 December 2012
Views and opinions expressed by former Temasek employees and management do not represent the views of Temasek; even if those former employees are identified as former employees.

(As of now, around 3.10pm, Temasek seems to have removed that page from its website; and I don't know why.)

Anyway, that statement can be found in this article:
Olam Not Similar to Failed Enron, Says Ex-Temasek Director - Bloomberg
http://www.bloomberg.com/news/2012-...ailed-enron-says-former-temasek-director.html

And here's a video of Michael Dee talking about Olam and Temasek:
Fmr. Temasek Dir.: Olam Not Similar to Failed Enron: Video - Bloomberg
http://www.bloomberg.com/video/fmr-...r-to-failed-enron-mbd~oBe8S~uyEr1bWB2aVQ.html
(He seems to me to be at least half-supporting Temasek, while criticising Olam, so that's a bit funny... haha)

 

[jw5]

Re: Olam

Michael Lim 200,000 at 1.55.

Sorry for my typo error.....Ah Neh bot 1m at 1.54.

thanks for the update merl.

 

[JavaMocco]

Re: Olam

I am going to short Olam shares in the name of fun tomorrow.

Yes remember it's all in the name of fun and u must not whine, complain.

 

[Zatoichi]

Re: Olam

I am going to short Olam shares in the name of fun tomorrow.

So did you have "fun" shorting Olam shares today? LOL

http://www.bloomberg.com/quote/OLAM:SP/
http://www.bloomberg.com/quote/OLAM:SP/chart/

It opened at the low for today, which was slightly below yesterday's closing price but slightly higher than yesterday's low, before finally closing near the high for today, which was also slightly below yesterday's high.

Although it was only a slightly bullish day for Olam today, the volume for today was significantly lower than the average daily volume for the past week.

Coupled with the fact that Olam's stock price has been on a downtrend for the past few weeks, today's relatively low volume could/might be a signal that selling/shorting/bearish pressure/sentiments are at, or coming to, an end.

My analysis in this post is purely technical, i.e. based on looking at the chart pattern and volume, so although I could be wrong... I could also be right! haha

Anyway, please have some more fun shorting if you wish, but if I were you, I would stay away from this stock (i.e. neither long nor short) and let the "big boys" take over... unless you're also one of the "big boys" yourself?

Whipsawings can cause mental breakdowns, so be careful.

 

[Merl Haggard]

Re: Olam

More banks and broking houses have come out to downgrade Olam.

Last night Olam closed down 3.33% at US$1.16 in NY OTC market.

Expect Olam on Monday to open lower than its closing price of S$1.46.

 

[Confuseous]

Re: Olam

More banks and broking houses have come out to downgrade Olam.

Last night Olam closed down 3.33% at US$1.16 in NY OTC market.

Expect Olam on Monday to open lower than its closing price of S$1.46.

You may well be correct, although I have a slightly different take. When banks and broking houses start callling for "sell" they are prepping for their bigger clients to buy, I feel. Volume has been dropping generally, from 120million on 20 Nov to Friday's 20 million. Those who have not sold would not find it worthwhile selling now. The whipsaw mentioned by Zatoichi may well happen on Monday, with some nervous short-sellers rushing for cover; some already doing so in the last 30 minutes of trading, ending with a hammer. Whether it is a dead cat bounce will be clear by Wednesday - as usual the Mr Market will decide.