Surandy , my info is that Olam has the backing of the Temasek (...

Surandy , my info is that Olam has the backing of the Temasek ( Singapore government ) and the more secretive KC group. just try to find out more about them and you get to the Nigerian one and all the links seem to end up dead from there. They are both very powerful organisations. My understanding is that together they have around 35% which in most listed companies would be seen as control as you can virtually stop anything and can together normally get another 15% plus to follow your lead or at least not oppose you.

I agree that they are , on the face of it, not what you would consider a strong balance sheet driven company but they appear to be good traders and have seemed to ride right through the first GFC - I cannot see that they have weakened at all and in fact I reckon they have through the GFC had the financial muscle of their two largest shareholders. I dont see weakness in Olam at all and in fact think that the fact that they rode out the GFC.

The only thing they did was recognise a S$300million write-off of values and then raised S$300m by way of shares issued at around S$2.00. the parties followed their rights and I suppose most others in investment houses did likewise.

There is an interesting article about banking - I have shown the webpage below. It basically argues that in banking good bankers dont really need any capital because good banking practices always has a margin that suggests they make money between what they borrow at and what they lend that money out at less bad debts. They say that capital adequacy and capital restrictions really only require capital to protect you from bad bankers which lose money anyway so in fact capital adequacy programs dont work as good bankers will find private investment in times of distress and that is better than trying to constrain processes via capital adequacy.

link: http://www.forbes.com/sites/johntamny/2012/07/29/ron-paul-fractional-reserve-banking-and-the-money-multiplier-myth/

You have to copy and paste - my brain does not get how to show a link in HC.

Essentially you dont need to have great capital reserves if you are a trader and good at it and your shareholders are such that they can write out the cheque to help you in bad times.

I see Olam as one of these and as such dont believe that their assets will be distressed whilst the structure and control of Singapore is the way it is. I think it is precisely now that you have to have money in reserve because the industry is in a phase that will determine who are players in the future and in fact the cheap opportunities way below real value exist now - even cheap issues of shares will in fact pay their way as a rights issue now even at $1.15 will be worth far more in say 2016 when pricing and industry should have stabilised. I am of the opinion that SHV has a small window of opportunity that may well disappear once OLAM Australia has got its plant firing and filling up. The other benefit is securing volume for your plant and locking it into the future. Then there is the strengthening of the balance sheet.