{ "docId": "019dd923-622c-750b-8b96-063645a867ac", "docSlug": "ad39e81239e4", "documentTitle": "Olam International Ltd. (SGX:O32)", "authorId": "51_Muddy_Waters", "authorName": "Carson Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2012-11-27 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 53, "pageCount": 133, "prevPage": 52, "nextPage": 54, "slideType": "villain_critique", "function": "expose_contradiction", "density": "dense", "nDataPoints": 6, "notes": "This slide serves as a forensic accounting critique of Olam's acquisition practices.", "elementsJson": [ "paragraph" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b96-063645a867ac/53", "deckHref": "/decks/019dd923-622c-750b-8b96-063645a867ac", "deckJsonHref": "/decks/019dd923-622c-750b-8b96-063645a867ac.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b96-063645a867ac#slide-53", "components": [ { "bbox": null, "kind": "callout", "text": "The real book value of the acquired assets should have been less than S$38 million – probably much less.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-25b3-7229-befb-646e76b2ce5a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.13, "w": 0.72, "x": 0.14, "y": 0.15 }, "kind": "paragraph", "text": "The truth about the January 2010 Crown Flour Mill (“CFM”) acquisition should greatly alarm investors, particularly given the money Olam is now spending on acquisitions and CapEx. There is more than a hint of impropriety about this transaction, including massive asset value overstatement, and misleading disclosures about the asset at the time of purchase. However, CFM appears to be far away from hitting any of the profitability targets Olam laid out for it almost three years ago. It did not even generate positive operating cash flow in FY2011.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "933e36a3-6ebe-453f-9a87-b131663b322e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.72, "x": 0.14, "y": 0.65 }, "kind": "paragraph", "text": "Under the former owner, the Lababidi Group, CFM revalued its assets in CY2007 upward by 257.2%, from S$54.5 million to S$194.5 million. Without the revaluation, that PP&E would have been worth only S$38.6 million at the end of CY2008.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "a6e30d44-d0a0-49a3-933a-634372b260b6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.72, "x": 0.14, "y": 0.35 }, "kind": "paragraph", "text": "When Olam acquired CFM on January 12, 2010, it valued the net PP&E at S$168.6 million. The PP&E was revalued upward in two steps – first by 257.2% by the former owners, the Lababidi Group, and then by 25% by Olam itself upon purchasing CFM. The real book value of the acquired assets should have been less than S$38 million – probably much less. To corroborate that CFM’s assets were overvalued when Olam acquired the company, our investigators learned that Olam demolished one of the two factory buildings at the main factory, and replaced substantially all of the acquired equipment. Olam has never taken an impairment on CFM. In fact, it revalued CFM’s PP&E upward by 25.0% 13 days after its prior balance sheet. Olam bought CFM from a questionable seller - the Lababidi Group, which is controlled by Chief Maan Lababidi, who was arrested in 2012 for his alleged role in a Nigerian stock fraud. He was subsequently released but remains clouded in suspicion.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b8859f90-37c5-40cc-ba60-bf643fccf3d4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.72, "x": 0.14, "y": 0.29 }, "kind": "title", "text": "Olam Bought Massively Overvalued Assets, and then Overvalued Them by Another 25%", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6dee090f-3aea-4e53-9c40-729d2e2859d7", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.72, "x": 0.14, "y": 0.09 }, "kind": "title", "text": "Crown Flour Mill: a Case Study in Overpaying and Misleading Investors", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8d143bc5-1011-40b7-8ddd-2207de60c750", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.72, "x": 0.14, "y": 0.61 }, "kind": "title", "text": "Step 1: CY2007 upward valuation of 257.2%.", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9cac26ba-cc6e-47c0-b3fd-82f5382ff918", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 133, "from": 51, "beatId": "bfd56f27-9e0e-4a96-9fda-8bd5736531bb", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Victory", "beatSlug": "overcoming-monster-the-victory", "evidence": "Conclusion and recovery analysis", "position": 2, "confidence": 0.8, "parentBeatName": "Turn", "parentBeatSlug": "turn" } ], "loops": [ { "to": 60, "from": 50, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "55a0474f-bcfd-4075-a427-456e1a9d8b5a", "evidence": "Discussion of Olam's solvency crisis", "position": 1, "objective": "Highlight the risks of not addressing Olam's issues", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.6, "description": "Quantify what happens if the audience does nothing" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }