■ 2Q15 results below expectation, with net profit down 5% YoY and 1H net profit making up only 37% of full-year forecast.
■ PwC’s positive assurance is not a surprise to the market.
■ Lacks near-term catalyst. Maintain HOLD. GGM TP adjusted from SGD0.75 to SGD0.64.
2Q15 missed, weighed by metal division
2Q15 net profit fell 5% YoY, below our expectation, and 1H net profit reached only 37% of our full-year forecast. The energy division achieved strong growth, mainly driven by the oil-liquids business (volume +33% YoY and operating income +53% YoY). However, the energy coal market remains challenging as demand from China continues to decline. The gas & power division was in line. Although EBIT fell 18% YoY due to an extremely good 2Q14, it improved by 94% QoQ thanks to the new gas & power supply contracts signed in 2Q15.
But good performance in the energy, and gas & power divisions were not enough to offset decline in the metal division. EBIT of the metal division dropped to a loss of USD50m from a profit of USD109m last year. Key reason for the profit deterioration was a 70% plunge in aluminium spot premiums. Noble also announced the results of PwC’s review of its mark-tomarket models, valuations and governance framework. PwC has given positive assurance Noble’s mark-to-market valuations comply with relevant requirements.
PwC’s positive assurance is not a surprise to the market. We also think Noble is improving its transparency
. We expect Noble to enhance and formalise procedures for back testing and stress testing of the portfolio as suggested by PwC. We cut our EPS forecasts by 3-15% for the next three years on lower metal margins and associate contributions. Maintain HOLD for lack of near-term catalyst
. GGM-derived TP cut from SGD0.75 to SGD0.64
. (Read Report)
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Source : Maybank Kim Eng Research
Labels: Commodity, Noble Group