NOBLE GROUP LIMITED
N21.SI
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-to market models, valuations and governance framework.
- PwC has given positive assurance Noble’s mark-to-market valuations comply with relevant requirements.
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.
Wei Bin | http://www.maybank-ke.com.sg/ Maybank KE 2015-08-11
0.64
Down
0.75
