Kim Eng Research issued a buy call on Olam international on 3rd Sep. Target price is $2.98 which is based on 25x 2010F PE.
How analyst come out with XX 2010F PE is generally not publicly available unless we are their customers, which then they might send us the detailed report.
But, when I looked at the recommendation, the 25x looks high to me. It means that if the company choose to pay out ALL its earnings (which no companies do), it will take 25 years to get back my capital.
Unless the commodity industry generally is priced at 25x PE...
A separate report was published by CIMB-GK. Their target price is $2.75, based on 22x 2010F PE. Reason being that 22x PE is the historical mean since 2005. At least there is more basis for this estimation.
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