Noble Group 01 (May 08 - May 10)

[millionairemind]

November 11, 2009, 5.49 pm (Singapore time)

Noble's Q3 net profit up 11% to US$132 mln

By CHEW XIANG

Noble Group on Wednesday reported net profit fell 11 per cent for the three months to Sept 30.

The commodities supplier said profits were US$132.1 million compared to US$148.8 million a year ago. Revenue was 11 per cent lower, or US$8.4 billion, against US$9.4 billion last year.

Diluted earnings per share was 3.82 US cents, against 4.41 US cents a year ago.

The stock rose 3 Singapore cents today to close at S$2.83.

[winston]

Not vested. From DBS:-

Noble’s 3Q09 results were ahead of expectations on higher than-expected volumes and margins across the board. FY09F and FY10F forecasts have been raised significantly by 17.9% and 30.6%, respectively, on higher volume and margin expectations.

Maintain BUY, TP raised to S$3.25 (Prev S$ 2.80).

[grandmaster89]

I am vested. 3Q results was pretty much ahead of expectations and it broke quite a few Group Records. It is exciting times to be a Noble investor.

1) A Group's Record 9M YTD net profit of USD $471mil.

2) A Group's Record volume tonnage with a 23% growth

3) A Group's Record NAV of USD$ 3.1 bil

4) Development of new oil and gas trading platforum

5) A Record profit margin. Highest since 2005.

6) 40% drop in SGA expenses.

7) The Record highest quarterly profit of 132mil in group history excluding one-off gains.

8) CIC investment in the Group raises 650mil USD - potential to be recognised as a domestic Chinese player in the soya bean business.

Noble has grown to a stronger and much more well-capitalised company after this crisis.

It is only trading at PE 12 unlike Olam whose PE exceeds 20.

[winston]

Dear grandmaster89,

Thanks for the kind post above. I have been trading Noble over the years. Not vested now.

1) I think some of the recent earnings are from acquisitions. I need to see how sustainable operating earmings are.

2) I also need to see understand how they would be affected if commodity prices do not continue their current surge.

3) I was a bit concerned with the resignation of their CFO but it should be ok now

4) I'm very worried about their razor thin margins but I guess that's the nature of their business.

5) I also need to wrap my head around how they are affected by the BDI.

Take care,
Winston

[grandmaster89]

Hi Winston,

You bring up a few interesting points. I am happy to share my thoughts.

1) It is true that a substantial portion of Noble earnings is derived from disposal of its assets and other one off gains made during acquisitions (eg Gloucester). This is why as an investor, I compiled a date on Noble's operating profit to see whether is there any upward trend to match the growth of its net profits.

1997: 486 2003: 68,525
1998: -7,663 2004: 314,719
1999: 6,629 2005: 253,626
2000: 24,961 2006: 487,527
2001: 27,186 2007: 823,685
2002: 33,012 2008: 1,347,598

2) Commodity prices affect the revenue while the volume of goods following through its supply chain affect its bottomline. This is why Noble Group consistently highlights tonnage growth while keeping silent on prices except to mention its risk-management and hedging of its inventories.

Personally, I am under the impression that a plunge or rise in commodity price is immaterial to a supply chain manager (if its due to currency flux and not physical demand). Most of the gain in futures price is due to ppl shorting the USD by using the weak USD to buy high yield assets in the hope of making a capital and forex gain.

However Noble Group is in the physical trading of items to real-life industries. What matters is demand and tonnage carried within the supply chain. The only time where price mattered is during times of great volatility since futures contracts can incur losses. Actually, besides the loss of market share through a decrease in tonnage, volatile prices are Noble massive threat.

If future prices rises furiously due to speculators on the trading floor but few industries are buying steel as there is little demand for goods, Noble will be hammered!

Last year after 3Q 2008, Noble Group CFO Steve Marzo explains how commodity prices HAS NO EFFECT in Noble Group as it profits is derived from the supply chain. Moreover, lower commodity prices, will help commodity firms de-leverage since less money is required for working capital.

http://www.cnbc.com/id/15840232?video=924721651&play=1

3) CFO Steve Marzo is still working right? I just googled it but there is no news. Please DONT RESIGN ahaha!

4) Yes supply chain managers have razor thin margins averaging between 1-3%. Its very difficult to push the selling price up when your competitor is selling the exact same thing - coal, metals, oil etc.

5) BDI will affect its logistics business.

Despite the slump in commodity prices and the BDI, Noble net profit excluding one-off gains is in line with 2008 at $371 mil USD.

[winston]

Hi grandmaster89,

Thanks for the kind comments.

I meant the former CFO had resigned. However, it has been a while already, so I think things should be ok now. Normally, when I see a senior executive resign, my warning bells automatically goes off

Take care,
Winston

[grandmaster89]

Hi grandmaster89,

Thanks for the kind comments.

I meant the former CFO had resigned. However, it has been a while already, so I think things should be ok now. Normally, when I see a senior executive resign, my warning bells automatically goes off

Take care,
Winston

I do agree with you Winston. It is a common sight in the S Chips though. Haha Sino-Env now got a soap opera...

[winston]

Not vested.

NOBLE GROUP - Nomura maintained its "buy" recommendation on commodities firm Noble Group and raised the price target to S$3.30 from S$2.76. The Japanese stockbroker lifted its earnings per share forecast for Noble by 11.3 percent, citing the latter's association with China Investment Corp, strong balance sheet and ability to contain costs

Source: Reuters

[grandmaster89]

DJ Noble Group Target Raised To S$3.70 Vs S$3.30 By CIMB

DJ Noble Group Target Raised To S$3.50 Vs S$2.65 By JPM

JPMorgan raises Noble (N21.SG) target price to S$3.50 from S$2.65 on earnings upgrades following 3Q09 results. Broker says 3Q09 net profit 32% ahead of JPMorgan forecast as stronger-than-expected performance from energy and metals, minerals & ores (MMO) segments offset weak contribution from agricultural commodities. Raises FY09, FY10, FY11 earnings forecasts by 22%, 23%, 19%, respectively to reflect higher margins at energy and MMO segments and new soybean crushing plant in Argentina. Says, "we could see additional upside risk to FY10/FY11 earnings as various other assets kick in over 2010-2012." Maintains Overweight rating, adds stock to Analyst Focus List. Shares off 0.4% at S$2.82; STI off 0.1%. (KIG)

[Musicwhiz]

DJ Noble Group Target Raised To S$3.70 Vs S$3.30 By CIMB

DJ Noble Group Target Raised To S$3.50 Vs S$2.65 By JPM

JPMorgan raises Noble (N21.SG) target price to S$3.50 from S$2.65 on earnings upgrades following 3Q09 results. Broker says 3Q09 net profit 32% ahead of JPMorgan forecast as stronger-than-expected performance from energy and metals, minerals & ores (MMO) segments offset weak contribution from agricultural commodities. Raises FY09, FY10, FY11 earnings forecasts by 22%, 23%, 19%, respectively to reflect higher margins at energy and MMO segments and new soybean crushing plant in Argentina. Says, "we could see additional upside risk to FY10/FY11 earnings as various other assets kick in over 2010-2012." Maintains Overweight rating, adds stock to Analyst Focus List. Shares off 0.4% at S$2.82; STI off 0.1%. (KIG)

Ah, can always count on good old analysts to do what they do best - raise target prices !

And when the going gets tough, the tough get going. They will issue a report called "Ceasing Coverage" to hide their original mistakes, and to quietly clear up and disappear. When all signs are stable and the company is doing well, miraculously they appear again and "Initiate Coverage".

And people are actually getting paid to do this.......amazing world we live in eh ?