Religare Capital Markets downgraded Olam International Ltd to 'sell' from 'buy' and cut its target price to $1.40 from $2.40, as it expects the commodity trader's shares to be weighed down by concerns raised by short-seller Muddy Waters.
By 0426 GMT, Olam shares were down 0.96 per cent at S$1.55, off an intraday low of S$1.465, which was a three-and-a-half year low. Its shares have plummeted 27.5 per cent since the start of the year, compared with a 13.5 per cent rise in the Straits Times Index.
"Olam shares will face difficulty re-rating upwards and sustaining even a moderate earnings multiple for the next few quarters, even if the financial risks Muddy Waters warns of don't materialize," Religare said in a note.
The brokerage noted Olam's guidance that it won't be generating positive free cash flow until 2015, making it hard for the company to completely dispel the concerns raised.