Noble Group

DBS VICKERS RESEARCH on 14 Aug 2012

NOBLE reported Q2 2012 core profit of US$144.9 million (+7 per cent q-o-q, +10 per cent y-o-y) excluding US$49.9 million gain on supply chain assets. This was above our US$89-107 million estimate. Energy volumes rose against expectations of a seasonal decline. Earnings were given an additional boost by a tax credit of US$24.2 million as a result of disposal of the Gloucester Coal stake.

Energy's Q2 2012 operating profit dipped 10 per cent q-o-q (less than expected), but was 37 per cent higher y-o-y. Added coal off-take agreements and rising penetration in US energy markets helped to boost volumes by 16 per cent q-o-q to 34.4 million tonnes, against a seasonal decline in prior years. Agriculture's operating profit rose 8 per cent q-o-q (-69 per cent) to US$51.1 million as expected, given the start of the South American sugar and soyabean harvesting season. MMO (metals, minerals and ores) contribution nevertheless disappointed, falling more than expected.

FY12-14 forecast core profit raised by 4-9 per cent. We raised FY12-14 forecast Energy contribution by 2-3 per cent to account for better-than-expected YTD performance. However, we trimmed MMO contribution due to a potentially weaker H2 2012 iron ore outlook. Our discounted cash flow-based TP is maintained at S$1.30.

We expect 2H12 to be stronger supported by the peak in the Brazilian sugar harvesting season. Proceeds of circa US$788 million (capital and loan repayment from Gloucester) is expected to come in over the next six months. We recommend investors "buy" ahead of these positive events.
BUY