SINGAPORE (Nov 16): OCBC is maintaining its “hold” call on Olam with an unchanged fair value of $1.86 cents given that its 3Q results came in below expectation and its near-term outlook remains muted.

Olam’s 3Q15 revenue was up 4% at $4.5 billion, with all segments registering growth except its Food Staples & Packaged Foods segment, which faced lower volumes, prices and continued underperformance of its upstream Dairy operations.

EBITDA margin nearly halved to 2.3% from 4.9% a year ago, due to reduced trading volumes and as Dairy operations continued to underperform as Olam is restructuring the dairy farming business in Uruguay and it expects to book a one-time restructuring cost in 4Q.

In a Friday report, lead analyst Carey Wong says outlook for commodities is likely to remain a mixed bag, and while prices are mostly lower, management notes that it is due to higher supply, and not because of lower demand, especially for food-related commodities.

In addition, Olam will continue to optimise the shape of its portfolio and reduce complexity of its business to reduce operating costs.

Separately, management remains upbeat about its JV with Mitsubishi to import and market an agreed list of products such as coffee, sesame, edible nuts into Japan.

Olam also sees opportunities for both of them to collaborate in mutually beneficial business opportunities.

All in, OCBC says the near-term bearish commodities outlook is likely to weigh on sentiment and is paring its earnings estimates for FY15 by 19% and FY16 by 12%.

Olam is down 2.6% at $1.87.