Noble Group - Metal division weighed; No catalyst

■ 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.


Technical Analysis
Daily Chart
Maintain HOLD
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)

Read Related Report
Noble Group - May not be enough
Tuesday, 11 August 2015
- DBS Group Research

Source : Maybank Kim Eng Research

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