- Back in early September 2023, several Nigerian news outlets reported that Olam Nigeria and Olam International were investigated for their alleged involvement in more than US$50 billion (S$67 billion) foreign exchange fraud. The Group has officially denied the allegations and swiftly set up a review that is conducted by the Audit Committee, assisted by external counsel and auditors.
- Following the accusation, bond prices for OLGPSP 5.375% Perpetual Corp (SGD) and OLAMSP 4.000% 24Feb2026 Corp (SGD) nosedived. However, prices have since stabilised absent further follow-up from Nigerian authorities while news flow regarding Olam’s accusation faded.
- On 19 February 2024, Olam Group Limited (“Olam”) announced that the review by the company’s Audit and Risk Committee, external counsels, and independent external accountants had been completed. The investigation team did not find evidence that Olam Nigeria was involved in the multi-billion-dollar fraud, as reported by the Nigerian media.
- The Group further highlighted that it has “fully cooperated in the fraud enquiry of Nigerian authorities, and no charges have been brought by them against its unit or any of its officers." Moving forward, Olam also stated that it will continue to operate in Nigeria normally and sees it as an integral part of its future strategic plan. The Group also plans to further strengthen its governance and compliance in the nation.
- Prior to this, positive news regarding Olam has also resurfaced in Nigeria (the launching of educational grants and being the recipient for several awards). In particular, Olam Agri’s Country Head in Nigeria, was awarded the Most Admired CEO in the Agriculture sector at the prestigious Nigerian Business Leadership Awards (NBLA) in December last year. While the re-emergence of positive news flow cannot be taken as a definite sign that the allegations are false, it certainly reinforces the probability of them being untrue in our view.
- Overall, the Group’s announcement was good news for bondholders of Olam’s issuances. If the allegations were to be concluded as untrue, we see no material impact on Olam Nigeria’s operation and consequently to the Group’s bottom line and credit profile. Maintaining the view from our previous update, we believe the Group’s credit profile has moderated but remains decent. We expect softer earnings for FY23 as last year’s profit tailwinds have faded while costs have risen. That said, earnings should improve over time given upcoming earnings opportunities across its subsidiaries and favorable demand-supply dynamics supporting agriculture prices.
- We see stronger reasons for bondholders not to sell either the fixed rate or perpetual bond (“perp”) in light of Olam’s announcement backed by our positive view on the Group’s credit profile and financial outlook. Amongst the issuances, we reiterate our preference for the fixed rate over the perpetual bond (“perp”).
- In our view, the fixed rate bond (OLAMSP 4.000% 24Feb2026 Corp) remains more attractively priced as compared to the perp, considering the much shorter years to maturity (2.0 years) of the fixed rate bond which we expect fewer uncertainties in cashflows and business risks like fraud accusations.
- That said, we think the perp (OLGPSP 5.375% Perpetual Corp) offers a relatively higher yield compared to other SGD perps, largely due to the perceived risk arising from the fraud accusation. We note that the perp was issued under Olam Group Limited, the parent company, while the fixed rate bond was issued under Olam International Limited (under the Olam Food Ingredients business). Before the intended IPO of Olam Group’s operating segments, 1) Olam Agri and 2) Olam Food Ingredients (targeted in 2024), we did not see any material difference between the credit profile of Olam Group and Olam International Limited. Upon the IPO of these two segments, we expect Olam Group to see a reduction in cashflow which may result in a potential degradation in Olam Group’s credit profile.
Our podcast series, Yield Hunters, is available on Spotify, iTunes Podcasts and Google Podcasts. We share our thoughts on new bond issues and hold discussions on the fixed income space. Listen to our latest episode below and follow us!
All materials and contents found in this site are strictly for general circulation and informational purposes only and should not be considered as an offer, or solicitation, to deal in any of the funds or products found/identified in this site. While iFAST Financial Pte Ltd ("IFPL") has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies and typographical errors. Any opinion or estimate contained in this report is made on a general basis and neither IFPL nor any of its servants or agents have given any consideration to nor have they or any of them made any investigation of the investment objective, financial situation or particular need of any user or reader, any specific person or group of persons. You should consider carefully if the products you are going to purchase are suitable for your investment objective, investment experience, risk tolerance and other personal circumstances. If you are uncertain about the suitability of the investment product, please seek advice from a financial adviser, before making a decision to purchase the investment product. Past performance is not indicative of future performance. The value of the investment products and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. In respect of any matters arising from, or in connection with the said research analyses or research reports, recipients of the report are to contact IFPL at 10 Collyer Quay, #26-01 Ocean Financial Centre Building, Singapore 049315, or by telephone at +65 6557 2853. Where the report contains research analyses or research reports from a foreign research house and if the recipient of such research analyses or research reports is not an accredited investor, expert investor, institutional investor or an ex-accredited investor, IFPL accepts legal responsibility for the contents of such analyses or reports to such persons only to the extent as required by law. Please note that only certain security(ies) herein are available to all investors, while the rest are only available for certain persons to invest in, such as Accredited Investors (as defined in the Securities and Futures Act) or one who invests at least S$200,000 (or its equivalent currency) per transaction. To qualify as an Accredited Investor, one needs to submit a declaration form and certain relevant supporting documents, according to iFAST’s prevailing policies and procedures.
Please read our full disclaimers on the website at ( https://secure.fundsupermart.com/fsmone/policies/328125/investment-account-terms-&-conditions).
iFAST Financial Pte Ltd (IFPL) (registered address: 10 Collyer Quay #26-01 Ocean Financial Centre Singapore 049315, Telephone: 6557 2000) holds the Financial Advisers Licence issued by the Monetary Authority of Singapore ('MAS') to conduct regulated activities of advising on securities, marketing of collective investment schemes and arranging of any contract of insurance in respect of life policies, other than a contract of reinsurance and the Capital Markets Services Licence issued by the MAS to conduct regulated activities of dealing in securities and providing custodial services for securities. While IFPL has made every effort to ensure the independence of the report's contents, IFPL's nature of business is such that IFPL and its connected and associated entities together with their respective directors, officers and staff may be involved in providing dealing or investment-related services in the abovementioned securities, and have taken or may take positions in the securities mentioned in this report, and may also act as the principal for any buy or sell trades.
Please note that only certain bond(s) herein are available to all investors, while the rest are only available for certain persons to invest in, such as Accredited Investors (as defined in the Securities and Futures Act) or one who invests at least S$200,000 (or its equivalent currency) per transaction. To qualify as an Accredited Investor, one needs to submit a declaration form and certain relevant supporting documents, according to Fundsupermart.com's prevailing policies and procedures. Please read our full disclaimers in the website.