UBS downgraded Olam International Ltd to 'sell'
from 'buy' and cut its target price to S$1.33 from S$2.95,
citing uncertainties around the cost of its Gabon project.
Olam shares were down 0.3 percent at S$1.60 by 0100 GMT,
around 8 percent below the level they were at before
short-seller Muddy Waters launched an attack on the commodities
trading company for its accounting practices and aggressive
UBS said the World Bank now estimates the total cost of the
Gabon project to be at $1.5 billion to $2 billion, compared with
Olam's initial estimate of S$1.3 billion.
"A cost overrun and project delays significantly increase
the risk to management's target of turning free cash flow
positive by 2015," said UBS in a note.
The brokerage also said its bankruptcy analysis of Olam
shows the company's financial position has deteriorated to below
financial health levels, but remains above distress levels.
"A number of concerns have arisen in recent months," said
UBS, including Olam's earnings quality and growth, deteriorating
returns on asset investment, the risk of Nigerian export credit
write-downs, management compensation, the recent share buyback
considering its capacity expenditure requirements and negative
free cash flow.
0901 (0101 GMT)