UBS downgraded Olam International to "sell" from "buy" and cut its target price to S$1.33 from S$2.95, citing uncertainties around the cost of its Gabon project.
Olam shares were down 0.3 per cent at S$1.60 by 0100 GMT (9am Singapore time), around 8 per cent below the level they were at before short-seller Muddy Waters launched an attack on the commodities trading company for its accounting practices and aggressive acquisitions.
UBS said the World Bank now estimates the total cost of the Gabon project to be at US$1.5 billion (S$1.8 billion) to US$2 billion, compared with Olam's initial estimate of S$1.3 billion.
"A cost overrun and project delays significantly increase the risk to management's target of turning free cash flow positive by 2015," said UBS in a note.
The brokerage also said its bankruptcy analysis of Olam shows the company's financial position has deteriorated to below financial health levels, but remains above distress levels.
"A number of concerns have arisen in recent months," said UBS, including Olam's earnings quality and growth, deteriorating returns on asset investment, the risk of Nigerian export credit write-downs, management compensation, the recent share buyback considering its capacity expenditure requirements and negative free cash flow.