Noble Group 01 (May 08 - May 10)

[winston]

UPDATE 1-Noble says new investor may buy major stake

* Says discussions may or may not lead to major stake deal
* Talks come as energy players hunt for assets (Updates with background)

SINGAPORE, Sept 16 (Reuters) - Singapore-listed commodities firm Noble Group said on Wednesday it is in talks with an unnamed investor to take a major stake in the $5.5 billion firm that has interests ranging from coal to ethanol.

"Investors have been in discussion with Noble with a view to their becoming shareholders in the company. Noble is engaged in detailed negotiations with one of these investors," the firm said in a statement to the Singapore stock exchange.

The talks could lead to "the purchase of a major shareholding" by the unnamed investor, the firm added.

National energy producers and trading firms have been on the hunt for assets to secure supplies and to give them trading leverage.

Recent deals include the purchase of oil refiner Singapore Petroleum by PetroChina <0857.HK> and Swiss oil firm Addax Petroleum Corp by Chinese energy major Sinopec Group.

"Commodities are very much in interest these days," said Lee Wen Ching, an analyst at OCBC Securities in Singapore. "Noble is very well diversified across various assets such as agriculture, metals and energy. It is a key beneficiary of the economic recovery." Hong Kong-based Noble has interests ranging from sugar and ethanol in Brazil to ports to soy crushing operations in China.

The firm also owns ports and warehouses across the globe and is involved in the trading of coal and other commodities.

Bank of America-Merrill Lynch said in a report on Tuesday that Noble's chief operating officer met over 30 investors in Europe earlier this month.

It said Noble's profits will likely grow robustly in the next three to five years, with new capacities in sugar, soybeans and potentially natural gas slated to come onstream in the next year.

"We believe Noble could raise capital via debt and equity to fund its natural gas venture," the bank said, maintaining a "buy" rating on the stock with a target price of S$2.40.

The firm's market capitalisation is about $5.5 billion based on its last traded price of S$2.30 a share.

Noble's shares have been suspended from trading since Tuesday.

[email protected]; +65 6403 5663

[winston]

Not vested. From CIMB:-

Noble Group Ltd (S$2.30) - Strong profit outlook

We expect Noble’s 3Q09 results to be strong as Noble likely has benefited from
skyrocketing sugar prices, up 81% this year and 25% in 3Q09 alone, and the slumping BDI.

Our EPS forecasts and target price of S$2.75 are unchanged, still based on 8.4x forward EV/EBITDA (one standard deviation above its mean since Jan 04), pending details of a potential stake sale. We expect the dilution impact to be small.

Longer term, we expect contributions from its coal business to increase as mine output rises. Noble aims to be among the top-5 coal producers in Australia by 2013, targeting an annual output of 16m tonnes, from around 4m tonnes currently.

Potential stock catalysts are acquisitions at distress prices, and stronger-than-expected profit contributions from fledgling oil and gas operations.

( Who would be so stupid to sell at distress prices ? )

[winston]

FACTBOX-Key facts on commodities trader Noble

HISTORY:
- Founded in 1987 by Richard S. Elman and headquartered in Hong Kong
- Listed in Hong Kong in 1994. Delisted in 1996 after an independent third party purchased 60 percent of the free float. Re-listed in Singapore in March 1997.

BUSINESS: - Engaged in managing the global supply chain/trading of agricultural, industrial and energy products. Also involved in ship ownership, chartering and the provision of technical ship management services, trade finance, coal mining, soybean and sugar-cane crushing activities, and ethanol production in Brazil.

CAPACITY: - Installed soy crush capacity of 11,300 tonnes per day. Processes 9,600 tonnes of soybean in China daily. Recent acquisition of an oilseed processing complex helps it capture about 10 percent of China's active output in this sector.

Located just north of Shanghai, this facility has two processing lines and two vegetable oil refineries with daily capacities of over 3,000 tonnes and 1,200 tonnes, respectively.
In addition, it has a tank farm capable of storing approximatively 70,000 tonnes of vegetable oil, giving the company the ability to distribute all kinds of vegetable oils. -

Noble's energy segment reported a lower revenue of $7.3 billion in the first half of 2009 compared with $10.6 billion in the first half of 2008, due to lower prices in their key
products - thermal coal, carbon products (coking coal and coke) and carbon credits. Segment tonnage was 38.7 million metric tonnes in the first half of 2009, the highest tonnage volume in segment history, and up 10 percent versus the 35.1 million metric tonnes in the first half of 2008.

THE DRIVING FORCE:
- Noble's chief Elman left school at 15 and went to work in a scrap yard. He grew up in London and moved to Hong Kong about 40 years ago. Then he built his career as a physical commodities trader at Phibro. At Phibro, Elman was Regional Director of their Asian operations for ten years including two years as a Board Director in New York.

With that experience, Elman went on to set up Noble in 1987 with $100,000. Elman, 69, has been doing business in China since the 1960s, long before it became what it is today.

FACTS & FINANCIALS:
Noble's global network encompasses more than 100 offices in over 40 countries across five continents. It has more than 4,000 customers worldwide and employs about 4,800 people.

- Finalising construction of a large-scale soya crushing plant in Argentina.
- Laying the groundwork for tank farms for distillates, ethanol, biodiesel, vegetable oil and gasoline in Rotterdam. These tank farms will have a storage capacity of 500,000 cu m in 2011.
- Branching out into the European power and gas sectors, after recruiting three former executives from hedge fund GLG Partners Inc (GLG.N) in 2009
- Started distillates trading in London in 2009.
- Plans to boost distribution and storage capabilities in oil hub Singapore and China in the near future. [ID:nSP492665]
- Noble took over clean storage tanks from Cargill at Vopak to store gasoline this year, and started trading on the Singapore cash market for the first time in early May.
- As of May 27, 2009, Noble held a 58.36 percent interest in Gloucester Coal Limited
- In November 2008, it announced the sale of its interest in Portman Limited.
- In September 2008, Noble and H.E.S. Beheer N.V. acquired Maas Silo B.V.

Source: Compiled by Felicia Loo and Judy Hua; Reuters

[winston]

UPDATE 1-China CIC buys $850 mln stake in commodity firm Noble

* China's CIC buys 14.5 pct stake in Noble for $850 mln
* Latest in flurry of Chinese investments in commodities
Shares priced at 8 pct discount to last traded price (Updates with details)

SINGAPORE, Sept 22 (Reuters) - Trading firm Noble Group said on Tuesday that Chinese sovereign wealth fund CIC bought a 14.5 percent stake in the firm for $850 million, giving China more exposure to global commodities markets.

Noble said in a statement it had agreed to sell 573 million shares to China Investment Corporation at S$2.1137 per share, an 8 percent discount to its last traded share price of S$2.30.

The placement consists of 438,000,000 newly issued shares by Singapore-listed Noble and 135,000,000 shares from trusts associated with the interests of Noble founder and CEO Richard Elman, Noble said.

Noble's shares have been halted for the past week, when it said it was in talks with an unidentified investor for a major stake.

The deal gives CIC exposure to a mix of Noble's hard assets and trading acumen, and shows big emerging market governments and state companies are pursuing resource firms that give them trading leverage in global markets as well as access to the raw materials they need to feed their economies.

The placement is subject to approval of the respective boards of directors of Noble Group and CIC and final legal documentation.

Noble manages a global supply chain and trades agricultural, industrial and energy products. It is also involved in shipping, trade financng, coal mining, soybean and sugar-cane crushing and ethanol production in Brazil.

Source: Reuters

[winston]

Not vested. From CIMB:-

Valuation and recommendation

Maintain Outperform, target price lowered to S$2.65 (from S$2.75). Our FY09-11
EPS estimates are reduced by 11% due to dilution partially offset by higher interest
income. We view the placement to CIC as a positive as it removes the share overhang
concerns. Moreover, we believe that the large placement proceeds are sufficient to fund
Noble’s growth over the next few years.

We continue to like the stock as the company is in a prime position to benefit from the global recovery, with new assets coming online over the next twelve months. Our target price is lowered to S$2.65, still based on 8.4x forward EV/EBITDA (one standard deviation above its mean since Jan 04, as investors anticipate further strengthening of commodity prices and profitability), from S$2.75.

Catalysts are acquisitions at distress prices, and stronger-than-expected profit
contributions from its fledgling oil and gas operations. Maintain Outperform

[winston]

Not vested.

Noble sees big rise in China's need for soy imports By David Stanway

BEIJING, Sept 24 (Reuters) - China's soybean imports are set to rise substantially in the next few years, an executive at commodity trader Noble Group (NOBG.SI) said on Thursday.

Jaime Teke, global head of structured finance at the firm, which this week agreed an $850 million equity investment from Chinese sovereign wealth fund CIC, said China had little room to increase its own soybean crop.

"We don't see the conditions are right here in China," he told Reuters on the sidelines of the Latin America China Investors Forum in Beijing. "One of the big problems is irrigation. Definitely, imports of soybeans from Brazil and Argentina will rise substantially.

"China has no water. What we are doing essentially is importing water in the form of soybeans and grains."

Noble has two soy crushing plants with 3 million tonnes of capacity in China, around 12 percent of the market, Teke said.

Despite the deal with China Investment Corp, which now holds 14.5 percent of the trading company, Noble is not yet planning to expand its soy business in China, the world's biggest importer of the crop.

"We would like to expand but we're not allowed to," Teke said.

This year China is expected to import about 40 million tonnes of soybeans, mainly from the United States, Brazil and Argentina. The volume of imports dwarfs China's own harvest of around 15 million tonnes.

Teke declined to comment on the CIC deal.

http://www.reuters.com/article/marketsN ... 24?rpc=611

[Aspellian]

Published September 28, 2009

More investment value in Noble than Olam

By OH BOON PING
businesstimes

SO the state-owned enterprises are on the hunt for value investments again. Just last week, China Investment Corp (CIC) took strategic stakes in Indonesia's Bumi Resources and commodity trader Noble Group, while PetroChina completed its buyout of Singapore Petroleum Company.


Singapore's Temasek Holdings also recently bought stakes in commodity firm Olam International and Brazil oil services firm San Antonio.

In all the cases, the intention seems clear: to diversify their portfolios by getting exposure to the resources industry.

What is curious, however, is the fact that Temasek which could have similarly bought into Noble, chose to park its money with its peer Olam instead.

Both are global supply chain managers. Olam is in the agriculture, food and logistics space, and Noble has interests in agriculture, logistics, chartering, metal and ores, coal and carbon credits.

The latter's assets range from Brazilian sugar mills to Australian iron ore to oilseed-processing facilities in China and India and its access to export markets is supported by port facilities it owns in South America.

It is precisely for this reason that CIC agreed to spend US$850 million, with a view to investing in 'infrastructure assets and supply-chain management related to agricultural commodities'.

And both stocks should similarly benefit from the growing middle-class consumption of food products, which will keep sales volume buoyant. All of which means, the diversification benefits from agricultural exposure should be similar for both Olam and Noble.

However, what makes Noble stand out is the fact that its exposure to the cyclical components - metals, minerals and ores, and energy - allows the stock to ride on the nascent economic recovery.

Since the onset of the financial crisis, undervalued assets have emerged, and both companies have been quick to use inorganic growth to support business expansion.

But Noble's stronger cash balance (US$748.5 million as at June 30, versus Olam's $266.2 million), means that the company generally has the resources to fund acquisitions without having to do a massive share issue that will dilute existing shareholding.

On this point, OCBC Investment noted that 'Noble's prudent balance sheet management has allowed it to fund acquisitions without needing to raise additional capital'. In contrast, 'its peer Olam has recently raised additional capital to fund inorganic expansion, at the expense of diluting existing shareholders' interests'.

Of course, Temasek had earlier pointed out, as its investment managing director David Heng said, that investment in Olam 'fits well with our investment theme of supporting emerging global champions'.

But from an investment standpoint, Noble's value proposition is certainly not inferior to Olam's, as seen from the diversity of its portfolio - and a stake in Noble does not even come at a substantial cost relative to Olam.

While it is true that Temasek paid US$303 million for 13.76 per cent of Olam - compared with CIC's US$850 million for 14.5 per cent of Noble - Noble's stock returns have generally outperformed Olam's. Therefore, it is conceivable that the returns per unit of dollar invested is higher for Noble than Olam.

And this brings us to the second point: the comparative valuations between the stocks. Prior to Temasek's investment in Olam in June, the stock traded at an average of $1.70, while Noble's price averaged $1.36.

And although Olam concentrates mainly on agricultural products, it generally trades at a far higher price-earnings ratio (PE) compared with Noble.

Higher return

'Noble is the only peer with a higher return on equity and yet lower price-to-book value ratio,' Kim Eng noted in an earlier report.

Given that Noble is substantially larger than Olam in terms of earnings per share, while cumulative returns are higher, its lower stock price suggests that a stake in Noble offers more value than a comparable one in Olam.

As at Friday, Noble's price-earnings multiple stood at 9.53 (versus Olam's 16.24) - which means there is still plenty of upside for CIC's Noble stake. Or perhaps at least more so compared with Temasek's stake in Olam.

[millionairemind]

Published October 14, 2009

Noble may close US$1.8b in loans this week

NOBLE Group Ltd, the Hong Kong-based supplier of raw materials from soybeans to sugar and steel, may close US$1.8 billion in loans this week, according to two people with direct knowledge of the matter.

A revolving US$1.2 billion loan in equal parts of two- and three-year terms could pay about 197 basis points more than the London interbank offered rate and 250 basis points over Libor respectively, the two sources said, without wanting to be identified as the transaction isn't final.

A new US$600 million facility has a tenor of one year and will pay about 135 basis points over Libor, they added. A basis point is 0.01 percentage point.

'We will make any appropriate announcements at the appropriate time,' Stephen Brown, director of investor relations, said by e-mail yesterday.

Noble Group said in a statement to the Singapore stock exchange on Aug 26 that the funds would be used for general purposes. Richard Elman, the company's chairman, said Noble aims to double profit to more than US$1 billion within three to five years, the Financial Times reported on Monday.

Nine banks were to help Noble secure the loans initially, according to the company's Aug 26 statement. That swelled to 10 following the addition of Agricultural Bank of China, the two sources said.

The original nine were Bank of Tokyo Mitsubishi UFJ, Commerzbank, DBS, HSBC, ING, JPMorgan Chase, Royal Bank of Scotland, Societe Generale and Standard Chartered.

Each of the 10 arrangers will hold US$100 million after the loans have been syndicated to other banks. They will keep US$20 million of the one-year loan, and US$40 million each of the two- and three-year loans, the sources said. -- Bloomberg

[winston]

Not vested. From CIMB:-

Earnings and target price upgrade. We remain bullish on commodity-related stocks given the upturn in the global economy, and continue to rate Noble an Outperform for its exposure to cyclical commodities.

Strong coal prices are expected to lift the company’s earnings. We have raised our FY10-11 EPS estimates by 3-9% on the back of stronger contributions from the energy segment. Our target price has been raised to S$3.30, now based on 8.0x CY11 EV/EBITDA, one standard deviation above its historical mean since Jan 04, as we roll forward to end-CY10 (previously S$2.65, 8.4x EV/EBITDA). We believe Noble will trade above its mean as we are in an economic recovery phase.

Potential coal mine acquisition. Newswires have been reporting that Noble is part of a consortium looking to purchase Sentula's (SNU SJ) 49.998% stake in the Koornfontein coal mine in South Africa for ZAR686m (US$93.7m). The bidding consortium consists of Noble's 60% subsidiary, Africa Commodities Group (AFC), and the Bravura Group.

The target mine. Koornfontein is a thermal coal mine with annual production capacity of 4.5m tonnes and 1.5m tonnes of Richards Bay Coal terminal entitlement. The mine has been producing at its maximum capacity, selling 3m tonnes to the domestic market and exporting 1.5m tonnes. According to Sentula, EBITA for Koornfontein in FY09 (March year-end) was ZAR153.8m (US$21m). Assuming the bidding consortium's stake is split 50:50 between AFC and Bravura, EBITA accretion to Noble would be around US$6.3m. Due diligence is expected to be completed by end- October.

Extending funding term. Separately, Noble announced that it plans to issue new 10-year notes (due 2020) in conjunction with a tender offer to buy back half (US$340m principal value) of its outstanding US$680m 6.625% bonds due 2015. The terms of the new notes are not available as pricing is not yet confirmed, but the issuance would be a positive step by the company to take advantage of its recent credit upgrade by Moody’s and lock in its long-term funding. Proceeds will be used to buy back US$340m of the 2015 bonds, with the remainder allocated to general corporate purposes, effectively extending the maturity of its US$340m debt by five years.

Benefiting from stronger coal prices. We expect Noble to benefit directly from rising coal prices due to its significant equity stakes in coal mines (67% of Donaldson, 87% of Gloucester, 30% of Middlemount) and rising coal production. Management intends to produce 16m tonnes by 2013 from 4m tonnes currently. Forward coal prices have risen on continued strong demand from China and India, and a stronger-than expected global recovery, with FY13-14 prices rising by as much as US$17/tonne since July.

Valuation and recommendation
Raising FY10-11 EPS estimates by 3-9% on the back of stronger contributions from the energy segment. Profits from the potential South African mine acquisition are insignificant against Noble’s group profit. With a S$926m war chest from its recent placement to CIC, we expect Noble to shift its focus to larger acquisitions going forward.

Maintain Outperform, target price raised to S$3.30 (from S$2.65). We continue to be bullish on commodity-related stocks given the upturn in the global economy. The proposed straight bond issue (as opposed to a convertible bond) is a positive as it will not result in dilution for equity holders.

Our target price has been raised to S$3.30, now based on 8.0x CY11 EV/EBITDA, one standard deviation above its historical mean since Jan 04, as we roll forward to end-CY10 (from S$2.65, 8.4x EV/EBITDA).
We believe Noble will trade above its mean as we are in an economic recovery phase.

[winston]

Not vested. Growth -20%; PE 20; From OCBC:-

Strengthening its balance sheet. Noble Group Ltd (Noble) has recently strengthened its balance sheet via an equity placement and a separate bond issue, raising net proceeds of over US$1.4b. Benefits of the capital raising exercises are threefold.

First, its enhanced capitalisation arms the group with financial flexibility to acquire distressed assets to boost inorganic growth.

Secondly, Noble will extend its debt maturity profile by refinancing its nearer term notes with longer term debt.

Thirdly, its strong cash position ensures the group has sufficient working capital in the event of a surge in commodities prices. The bond issue is non-convertible and therefore will not dilute interests of equity holders.

Acquisitions in the pipeline? Distressed assets have surfaced along with the economic recession, presenting Noble with opportunities to expedite its transformation from an asset-light business model towards one which is more asset intensive. The group aims to double its net profit to US$1b over the next three to five years.

We expect part of this growth to be driven inorganically. Its recent acquisition of SemFuel's assets via bankruptcy proceedings possibly marks the start of its pipeline of upcoming acquisitions. News wires have recently reported that a subsidiary of Noble
is in talks for an acquisition of a South African coal mine. We believe that Noble may be on the lookout for more strategic investments as part of its aim to secure long term access to supplies and to boost its throughput capacity.

Our preferred pick within the commodities sector. Commodities will be key beneficiaries of an economic recovery. Noble remains our preferred pick within the commodities sector by virtue of its diverse exposure to hard and soft commodities, coupled with a strong balance sheet and proven execution. The group will release its 3Q09 results on 11 Nov. We will be looking out for volume trends as well as signs of stabilisation in profit margins, especially within the metals and energy segments.

We have lowered our earnings estimates by 3% on higher interest costs arising from the bond issue, partially offset by higher ASP assumptions, but raise our peg to 17x (from 14x) in line with the STI, deriving a fair value estimate of S$3.14 (previously S$2.67). We maintain our BUY rating on the stock.