Olam International Ltd., the commodity supplier partly owned by Singapore’s Temasek Holdings Pte., rose the most in more than seven months after announcing a buyback of as much as 10 percent of its shares.
Olam climbed 8.9 percent, the most since Aug. 31, to S$1.77 at the close in Singapore. The stock had the biggest advance of the 30-company Straits Times Index, which rose 2.3 percent.
The buyback reflects “the confidence that Olam’s board has in the long term fundamentals and growth prospects of the group,” Chief Executive Officer Sunny Verghese said in a June 8 statement announcing the plan. The company, one of the world’s three largest suppliers of rice, cocoa and coffee, had dropped 24 percent this year to yesterday as commodity price volatility eroded profit.
“The share buyback is a signal to investors that the company is confident in its long-term prospects,” said Carey Wong, an analyst with OCBC Investment Research Pte in Singapore. “The market will also be looking at the funding ability. So far, the company says it intends to fund using its internal resources, but you have got to note that Olam’s borrowings to equities are among the highest.”
Olam will execute the plan “over an appropriate period of time” and at a maximum price of 105 percent of the average closing price of the last five trading days at the time of transaction, it said in the statement. The buyback will be funded from existing resources, it said.
Olam’s total debt is more than three times its equity, the highest among 60 of companies in the global food distribution industry, according to data compiled by Bloomberg.
The company, which forecasts net income to reach $1 billion by 2016, announced acquisitions of more than $500 million in the past year, including its first sugar mill in Brazil and a biscuit and candy maker in Nigeria.