Noble plunge leads to SGX ‘caution’ call; Noble Group’s Buybacks Exceed Almost All Its Recent Acquisitions

Noble Group’s Drawbridge Down; Shorts Cross Moat — Overheard

July 30, 2015 3:46 p.m. ET

With Noble Group’s defenses down, the shorts stormed the castle.

Shares of Noble, the embattled Asian commodities trader, plunged 12% Thursday to a 6½-year low and drew a “trade with caution” warning from the Singapore stock exchange. Noble’s stock has taken a beating in the past few months, as questions have been raised over the sustainability of the company’s profits. Noble has denied accusations about how it accounts for profits, and has also pledged greater transparency. But those moves haven’t prevented investors from increasingly betting against the shares. Noble’s shares on loan, a measure of short interest, have risen above 9%, according to Markit. To fight that pressure, Noble has countered by aggressively buying back its own stock. That may have limited the damage over the past month or so. But under Singapore Stock Exchange rules, Noble can’t buy back stock in the two weeks leading up to its earnings announcement, which is scheduled for Aug 13. That no-trading “blackout” period started Thursday. It could be a long two weeks for Noble’s shares.

Noble plunge leads to SGX ‘caution’ call

Nisha Ramchandani

31 July 2015

Business Times Singapore

SHARES in Asia’s biggest commodity trader, Noble Group, sank to a low of 50.5 Singapore cents on Thursday before closing at 52 cents, down seven cents or 11.9 per cent.

Noble was the third most actively traded stock by volume on Thursday as 138.42 million shares changed hands. Thursday’s price was the lowest that the stock has plunged to since around November 2008, prompting the Singapore Exchange to issue a query – the third in six months – and a subsequent “trade with caution” notice after Noble said in its reply that it was not aware of any reason that could explain the unusual price fall.

The stock price has more than halved since mid-February, after little-known firm Iceberg Research fired the first salvo by calling the group’s accounting practices into question. Noble, however, has denied these allegations.

In recent weeks, the group has been buying back its shares to bolster its price. A Bloomberg report highlighted that the group has spent S$131 million in the past seven weeks to acquire a 2.8 per cent stake via the open market by snapping up 191.8 million shares.

Meanwhile, Standard & Poors downgraded Noble’s credit rating to negative from stable recently.

“Despite all the buybacks, the stock continues to fall,” CMC Markets strategist Nicholas Teo was quoted as saying by Bloomberg. “Investors are concerned about the outlook for commodities and the impact the buybacks might have on the company’s balance sheet.”

Noble will be releasing its Q2 results on Aug 13, which means that it will not be able to repurchase shares for two weeks before its earnings are released, in line with SGX rules.

In addition to its usual conference call, Noble plans to hold a follow-up Investor Information Day, to address questions with regards to its businesses as well as the findings of a PricewaterhouseCoopers (PwC) Assurance Review. PwC was commissioned to conduct a third-party review of its marked-to-market models, valuations and governance framework by an independent board committee set up by Noble.

Noble Group’s Buybacks Exceed Almost All Its Recent Acquisitions

by Yuriy HumberJonathan Burgos

July 30, 2015 — 8:23 AM SGT

Noble Group Ltd., the Singapore-based trader that has been targeted by short-sellers and critics of its accounting, has recently spent more on its own shares than it has on all but one of its investments in four years.

Asia’s largest commodity trader has bought back its own stock at least 11 times since last month and built up a 2.8 percent stake from zero. Noble used S$131 million ($96 million) on the purchases, which company spokesman Stephen Brown said is a good way to use excess cash. The only time Noble spent more than that on an asset since 2011 was when it paid $140 million for a Jamaican alumina plant in 2014, according to data compiled by Bloomberg.

Noble’s stock has lost about half its value since mid-February, when a group calling itself Iceberg Research published criticism of the firm’s accounting. The shares slid 16 percent as of Wednesday’s close since Noble started reporting the buybacks on June 12. Noble has rejected the criticism and hired PricewaterhouseCoopers LLP this month to review its practices.

“If a company buys back shares aggressively it should be a positive for the share price,” said Wei Bin, an analyst with Maybank Kim Eng in Singapore, who has the equivalent of a hold rating on the stock. “In this case, it’s exactly the opposite” due to market concern that Noble’s credit rating may be downgraded, he said.

Standard & Poor’s changed Noble’s outlook last month to negative from stable. Moody’s Investors Services in May said it will maintain a stable outlook for the company.

Cautiously Conducted

Noble is the most shorted stock on Singapore’s Strait Times Index, according to Markit Group data compiled by Bloomberg. Short interest as a percentage of outstanding shares climbed to 9.7 percent as of July 28, Markit data show.

The company received a “positive cash inflow” of $3.3 billion in the last quarter of 2014 from the sale of equity and repayment of a loan related to the disposal of its 51 percent stake in Noble Agri, Brown said. Noble Agri is a joint venture in agriculture between Noble and a group of investors including Cofco Corp., China’s largest grain trader.

“Over the past six months the group has actively deployed this excess capital into growth businesses,” as well as paying a special dividend, Brown said in e-mailed comments. “Our share repurchases are being conducted cautiously and in the context of maintaining our investment grade profile.”

Credit ratings are key for trading firms as they rely on borrowed money to buy goods, secure purchase contracts and hedge against price volatility.

“From a credit perspective we would be quite careful about share buybacks” as they can affect a company’s liquidity, said Cindy Huang, an analyst with Standard & Poor’s covering Noble Group.

So far, the amount spent by Noble is “not huge” compared to the trading company’s liquidity, Huang said. If the pace of buybacks accelerates “that could be something we could be concerned about,” she said.

SGX issues trading query for Noble shares

JUL 30, 20152:50 PM

[SINGAPORE] Noble Group Ltd said it is not aware of any information that could explain the 14 per cent tumble in its shares on Thursday, after the Singapore bourse queried the sharp share move of Asia’s biggest commodity trader.

This is the third query issued to Noble in the past six months and comes as the stock has slumped by more than half since mid-February, hit by a critical accounting report from Iceberg Research and later echoed by short-seller Muddy Waters.

“The company is not aware of any information not previously announced concerning the company, its subsidiaries or associated companies which might explain the trading,” Noble said in a statement.

The Singapore Exchange said shareholders and potential investors should exercise caution when dealing in the securities of Noble. “The exchange will investigate all possible transgressions and will work with the relevant regulatory agencies to pursue actions to maintain a fair, orderly and transparent market,” SGX said. SGX routinely uses such wording in all its queries about unusual share moves.

Noble’s stock dipped to S$0.505, the lowest since November 2008. The company, which has rejected claims that it inflated assets by billions of dollars, said this month its board recommended a third-party review of its accounting practices.

A new committee of four independent board members has appointed PricewaterhouseCoopers (PwC) to review valuations of some of Noble’s assets.


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