Noble Group

OCBC on 11 May 2012

Noble Group (Noble) reported 1Q12 revenue rising 14.1% YoY and 13.5% QoQ to US$22.8b – meeting 26.1% of our FY12 forecast. Net profit fell 45.8% YoY (down 1.3% QoQ) to US$110.1m, or 16.8% of our full-year estimate, versus the street’s S$166m consensus; but if we strip out profit (loss) on supply chain assets, its recurring income was just down 9.8% YoY and up 35.2% QoQ at US$135.8m (20.7% of forecast). We are paring our FY12 revenue estimate by 1.1% and earnings by 12.1% to reflect potential economic headwinds around the globe. We are also easing back our valuation peg from 11.1x to 10.5x, which in turn reduces our fair value from S$1.46 to S$1.21. Maintain HOLD.

1Q12 earnings below consensus
Noble Group (Noble) reported 1Q12 revenue rising 14.1% YoY and 13.5% QoQ to US$22.8b – meeting 26.1% of our FY12 forecast, driven by the strong performance in its Energy segment. Net profit though fell 45.8% YoY (down just 1.3% QoQ) to US$110.1m, or 16.8% of our full-year estimate; but if we strip out profit (loss) on supply chain assets, its recurring income was just down 9.8% YoY and up 35.2% QoQ at US$135.8m (20.7% of forecast); the street was looking for ~US$166m net profit.

Margin improvements seen in most segments
Meanwhile, Energy and Metals, Minerals and Ores segments saw margin improvements; the former improving from 2.04% in 1Q11 to 2.15% in 1Q12; the latter recovered from 1.36% to 2.19% over the same period. While its Agriculture segment saw solid top line performance, with revenue up 14% YoY led by its Coffee division, overall margin fell from 4.02% to 1.29%, hit by weak crush margins. Meanwhile, Noble added that it has redesigned its supply chain in the Cotton division to minimize and mitigate future risk exposures.

No decision on Agriculture spin-off
Going forward, management expects the agricultural segments’ performance to strengthen over the year and it also notes that consolidation is “clearly going on” in the agricultural industry where it plans to play a role in that process. However, Noble said that no decisions have been made regarding the spin-off of its Agri business. Separately, it notes that the proposed merger between Yanzhou Coal Mining Company and Gloucester Coal is on track, with Gloucester to convene a shareholders meeting to vote on the merger on 4 Jun.

Lower S$1.21 fair value
We are paring our FY12 revenue estimate by 1.1% and earnings by 12.1% to reflect potential economic headwinds around the globe. We are also easing back our valuation peg from 11.1x to 10.5x, which in turn reduces our fair value from S$1.46 to S$1.21. Maintain HOLD.