Noble Group (Noble) reported FY14 revenue of US$85,816.1 (+4%), this now excludes the Agri business. But due to losses on supply chain assets of US$290.1m and other fair value impairments, net profit from continuing operations tumbled 66% to US$241.9m. And if loss from the discontinued Agri business was included, net profit would have fallen by 46% to US$132.0m. After taking total impairments, write offs and provisions of US$438m in FY14, management believes that the risk of further impairments is low. In any case, we have revised our FY15 estimates to reflect the new corporate structure, where we now expect revenue to grow 3% and underlying net profit to recover to around US$383.8m. However, our fair value dips from S$1.31 to S$1.05, even as we roll forward our 13.5x peg to FY15F EPS. Given the limited upside, downgrade to HOLD.
FY14 hit by revaluation losses
Noble Group (Noble) reported its FY14 results last night, which now excludes its Agri business; this making comparisons against our estimates and consensus slightly difficult. Revenue grew 4% to US$85,816.1m, with Noble shipping yet another record tonnage of 215m tonnes (+15%), driven by the Energy business. But due to losses on supply chain assets of US$290.1m and other fair value impairments, net profit from continuing operations tumbled 66% to US$241.9m. And if loss from the discontinued Agri business was included, net profit would have fallen by 46% to US$132.0m. Noble declared an interim dividend of 0.7 US cent/share (payable 20 Mar), bringing the total payout to 1 US cent; this versus 0.91 US cent in FY13.
Queries over fair values of Yancoal and other associates
During the call, there were many queries over the fair values of Yancoal and other assets, no doubt prompted by the recent Iceberg Research reports. In 4Q14, Noble wrote down the value of Yancoal on its balance sheet from US$678m to US$322m; this after taking into account several factors including expected future cashflows, capex etc. However, Noble stressed that the current market value of Yancoal's shares do not appropriately reflect the value and quality of its mines, given the two key shareholders own 91% of the shares. Noble also shed more light on the profile of its net fair value gains and losses, revealing that it has over 12k contracts with a weighted average tenor of five years and total underlying volume of over 1.5b tonnes.
Downgrade to HOLD
After taking total impairments, write offs and provisions of US$438m in FY14, management believes that the risk of further impairments is low. In any case, we have revised our FY15 estimates to reflect the new corporate structure, where we now expect revenue to grow 3% and underlying net profit to recover to around US$383.8m. However, our fair value dips from S$1.31 to S$1.05, even as we roll forward our 13.5x peg to FY15F EPS. Given the limited upside, downgrade to HOLD.
Noble Group (Noble) reported its FY14 results last night, which now excludes its Agri business; this making comparisons against our estimates and consensus slightly difficult. Revenue grew 4% to US$85,816.1m, with Noble shipping yet another record tonnage of 215m tonnes (+15%), driven by the Energy business. But due to losses on supply chain assets of US$290.1m and other fair value impairments, net profit from continuing operations tumbled 66% to US$241.9m. And if loss from the discontinued Agri business was included, net profit would have fallen by 46% to US$132.0m. Noble declared an interim dividend of 0.7 US cent/share (payable 20 Mar), bringing the total payout to 1 US cent; this versus 0.91 US cent in FY13.
Queries over fair values of Yancoal and other associates
During the call, there were many queries over the fair values of Yancoal and other assets, no doubt prompted by the recent Iceberg Research reports. In 4Q14, Noble wrote down the value of Yancoal on its balance sheet from US$678m to US$322m; this after taking into account several factors including expected future cashflows, capex etc. However, Noble stressed that the current market value of Yancoal's shares do not appropriately reflect the value and quality of its mines, given the two key shareholders own 91% of the shares. Noble also shed more light on the profile of its net fair value gains and losses, revealing that it has over 12k contracts with a weighted average tenor of five years and total underlying volume of over 1.5b tonnes.
Downgrade to HOLD
After taking total impairments, write offs and provisions of US$438m in FY14, management believes that the risk of further impairments is low. In any case, we have revised our FY15 estimates to reflect the new corporate structure, where we now expect revenue to grow 3% and underlying net profit to recover to around US$383.8m. However, our fair value dips from S$1.31 to S$1.05, even as we roll forward our 13.5x peg to FY15F EPS. Given the limited upside, downgrade to HOLD.
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