Noble Group (Noble) reported better performance in 4Q11, suggesting that the worst is likely over. For FY11, revenue jumped 42% to US$80,732m, or 0.4% above our forecast, while reported net profit slipped 29% to US$431m, it was around 13% above our forecast. However, we note that there could still be a dearth of near-term catalyst. While Noble revealed that it expects some development on the Gloucester-Yancoal merger front next week, management does not expect any deal to take place in 1Q12. Management also did not elaborate much on its planned listing of its Agri-business on SGX other than saying it has a new CEO for that division. While we are increasing our valuation peg from 10.5x (one standard deviation below 5-year mean) to 11.1x (0.5 SD), a lower USD/SGD assumption negates the increase, thus maintaining our fair value at S$1.46. Given the limited upside for now, we maintain our HOLD rating. We would be buyers closer to S$1.30.
Improvement in 4Q11
Noble Group (Noble) reported better 4Q11 results. Reported net profit though fell 57% YoY to US$106m, and it was an improvement from the US$18m net loss in 3Q11. For FY11, revenue jumped 42% to US$80,732m, or 0.4% above our forecast, while reported net profit slipped 29% to US$431m, it was around 13% above our forecast. However, if we strip out the likely one-off items, we estimate that recurring earnings would have slipped 29% to US$288m. Meanwhile, Noble has recommended a final dividend of 1.65 US cents per share, payable in cash or scrip, versus 2.5 US cents last year.
Margins showing slow recovery
Although overall net margin slipped from 1.1% in FY10 to just 0.5% in FY11, its various segments have started to show steady recovery. For Agriculture business, operating margin has improved from 1.2% in 3Q11 to 2.8% in 4Q11, but off 4Q10’s 10.9% margin. For Energy, operating margin has actually surpassed 4Q10’s 1.1% and 3Q11’s 1.3% to hit 1.6%. For its Metals, Minerals and Ores (MMO), operating margin also improved from 3Q11’s 0.6% to 0.7%, but still way below 4Q10’s 2.2%.
Worst is likely over but still lacks catalyst
Based on 4Q11 results, it appears that the worst is likely over. However, we note that there could still be a dearth of near-term catalyst. While Noble revealed that it expects some development on the Gloucester-Yancoal merger front next week, management does not expect any deal to take place in 1Q12. Management also did not elaborate much on its planned listing of its Agri-business on SGX other than saying it has a new CEO for that division.
Maintain HOLD with S$1.46 fair value
While we are increasing our valuation peg from 10.5x (one standard deviation below 5-year mean) to 11.1x (0.5 SD), a lower USD/SGD assumption negates the increase, thus maintaining our fair value at S$1.46. Given the limited upside for now, we maintain our HOLD rating.
Noble Group (Noble) reported better 4Q11 results. Reported net profit though fell 57% YoY to US$106m, and it was an improvement from the US$18m net loss in 3Q11. For FY11, revenue jumped 42% to US$80,732m, or 0.4% above our forecast, while reported net profit slipped 29% to US$431m, it was around 13% above our forecast. However, if we strip out the likely one-off items, we estimate that recurring earnings would have slipped 29% to US$288m. Meanwhile, Noble has recommended a final dividend of 1.65 US cents per share, payable in cash or scrip, versus 2.5 US cents last year.
Margins showing slow recovery
Although overall net margin slipped from 1.1% in FY10 to just 0.5% in FY11, its various segments have started to show steady recovery. For Agriculture business, operating margin has improved from 1.2% in 3Q11 to 2.8% in 4Q11, but off 4Q10’s 10.9% margin. For Energy, operating margin has actually surpassed 4Q10’s 1.1% and 3Q11’s 1.3% to hit 1.6%. For its Metals, Minerals and Ores (MMO), operating margin also improved from 3Q11’s 0.6% to 0.7%, but still way below 4Q10’s 2.2%.
Worst is likely over but still lacks catalyst
Based on 4Q11 results, it appears that the worst is likely over. However, we note that there could still be a dearth of near-term catalyst. While Noble revealed that it expects some development on the Gloucester-Yancoal merger front next week, management does not expect any deal to take place in 1Q12. Management also did not elaborate much on its planned listing of its Agri-business on SGX other than saying it has a new CEO for that division.
Maintain HOLD with S$1.46 fair value
While we are increasing our valuation peg from 10.5x (one standard deviation below 5-year mean) to 11.1x (0.5 SD), a lower USD/SGD assumption negates the increase, thus maintaining our fair value at S$1.46. Given the limited upside for now, we maintain our HOLD rating.
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