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Noble Group
Bloomberg: NOBL SP | Reuters: NOBG.SI
2 .3 0 315
265
fair value gain in Middlemount investment, 2Q10 earnings
1 .8 0
215
plunged to US$47.9m –the lowest quarterly profit in 3 years.
1 .3 0
165
This comes as a result of 33.3% drop in agriculture segment
0 .8 0
115
gross profit and a 69.1% jump in SG&A cost; while energy
0 .3 0 65
GPM was also lower than expected. Accordingly, 2Q10 net
2006 2007 2008 2009 2010 profit came in below our and consensus expectations.
N o b le G r o u p ( L H S ) R e la t iv e S T I IN D E X ( R H S )
Drop in agriculture margin, jump in opex. While we had
anticipated a reduced Agriculture gross profit of US$391m,
Forecasts and Valuation we understand that crushing margins were worse than
expected due to higher levels of farmer retention, resulting in
FY Dec (US$ m) 2009A 2010F 2011F 2012F occasionally negative margins in both China and Argentina
Turnover 31,183 38,867 45,390 50,383 operations. The group had also expensed larger portion of
EBITDA 722 792 999 1,198 staff compensation costs, start up costs in Oil & Gas division,
Pre-tax Profit 620 495 667 815
as well as office relocation expenses, and risk management
Net Profit 556 426 567 692
Net Pft (Pre Ex.) 430 426 567 692 systems.
EPS (S cts) 19.8 9.8 13.0 15.9
EPS Pre Ex. (S cts) 15.3 9.8 13.0 15.9 Lowering ROE guidance. Noble has now guided for lower
EPS Gth Pre Ex (%) (37) (36) 33 22 ROE of 15% from 20% previously, considering the drop in 5-
Diluted EPS (S cts) 19.8 9.8 13.0 15.9 year treasury rate. The group remains confident that it can
Net DPS (S cts) 3.8 2.4 3.3 4.0 double its earnings in a few years’ time.
BV Per Share (S cts) 105.0 76.3 86.9 99.6
PE (X) 8.0 16.2 12.2 10.0 FY10F-11F EPS cut by 23-25%, downgraded to Hold. On
PE Pre Ex. (X) 10.4 16.2 12.2 10.0
account of lower agriculture and energy contribution and
P/Cash Flow (X) 6.9 13.0 10.1 8.3
EV/EBITDA (X) 9.9 12.3 10.2 8.6 higher SG&A, we cut FY10F -11F EPS by 23-25%. Our DCF-
Net Div Yield (%) 2.4 1.5 2.0 2.5 derived TP is also lowered to S$1.62 from S$2.00. While we
P/Book Value (X) 1.5 2.1 1.8 1.6 believe the market has already priced in the poor results,
Net Debt/Equity (X) 0.9 0.8 0.8 0.8 there remains little catalyst for the stock in the near term.
ROAE (%) 23.1 13.6 16.0 17.1
www.dbsvickers.com
Refer to important disclosures at the end of this report
ed: JS / sa: JC
Company Focus
Noble Group
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Company Focus
Noble Group
Selling, administrative & op. exp. -118.4 -141.7 -200.2 69.1 41.3 Start up costs, office relocation, staff cost provisions
EBIT 149.7 190.5 114.4 -23.6 -39.9
Attributable to:
Shareholders 248.8 115.0 86.6 -65.2 -24.8
Minority interest 1.4 0.2 -0.2 NM NM
Profit for the year 250.2 115.2 86.4 -65.5 -25.1
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Company Focus
Noble Group
DCF Valuation
Cost of debt WACC (%)
Tax rate 15.0% Equity portion of capital 61.0%
Kd 5.4% Ke 15.9%
Debt portion of capital 39.0%
Cost of equity Kd 5.4%
Risk free rate (Rf) 3.5% WACC 11.8%
Market return rate (Rm) 10.0%
Beta (ß) 1.9 Terminal value
Risk premium (Rm-Rf) 6.5% Implied perpetual growth rate 3.0%
Ke 15.9% Implied FY10F EBITDA multiple 8.7
Free cash flow (US$ m) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Operating profit 764.3 926.9 1,000.5 1,097.9 1,182.6 1,264.3 1,344.1 1,423.8 1,508.9 1,600.0
Tax -100.1 -122.2 -136.8 -157.0 -176.6 -193.7 -212.4 -231.9 -253.2 -278.7
Op. profit after tax 664.2 804.7 863.7 940.9 1,006.0 1,070.6 1,131.7 1,191.8 1,255.8 1,321.2
Amortisation & depreciation 108.2 131.6 147.9 164.1 181.3 198.2 213.7 227.8 240.5 251.9
Gross cash flow 772.4 936.3 1,011.6 1,105.0 1,187.3 1,268.8 1,345.4 1,419.6 1,496.3 1,573.1
Capital expenditures -584.3 -519.8 -437.7 -355.3 -331.7 -308.8 -287.1 -266.8 -248.0 -230.6
Incremental working capital 21.3 30.8 40.6 44.6 49.0 53.5 58.7 64.0 69.4 75.1
Free cash flow 209.4 447.3 614.4 794.4 904.6 1,013.5 1,117.0 1,216.8 1,317.7 1,417.7
growth 113.6% 37.3% 29.3% 13.9% 12.0% 10.2% 8.9% 8.3% 7.6%
PV of free cash flow 209.4 400.2 491.7 568.7 579.3 580.6 572.5 557.9 540.4 520.1
Total PV of free cash flow 5,020.7
PV of residual value 5,919.8
Corporate value 10,940.5
Ending cash 937.3
Shareholder value 7,324.5
Fair value/share (US$) 1.23
Fair value/share (S$) 1.62
Source: DBS Vickers estimates
% Chg % Chg
Implied ASP/MT (US$) 2Q09 1Q10 2Q10 YoY Gross profit (US$ m) 2Q09 1Q10 2Q10 YoY
Agriculture 463.1 516.0 519.1 12.1 Agriculture 114.0 96.0 76.0 -33.3
q-o-q growth -6.2% 5.4% 0.6% q-o-q growth 6.5% 124.3% -20.8%
Energy 223.8 356.6 406.8 81.7 contribution 42.5% 28.9% 24.1%
q-o-q growth 41.3% 18.0% 14.1% Energy 121.0 108.0 163.0 34.7
MMO 183.4 308.9 302.7 65.0 q-o-q growth 255.9% -47.0% 50.9%
q-o-q growth 41.6% 44.2% -2.0% contribution 45.1% 32.5% 51.7%
Logistics 13.4 17.2 14.0 4.9 MMO 0.0 74.0 45.0 NM
q-o-q growth 43.6% -0.7% -18.3% q-o-q growth NM 26.5% -39.2%
contribution 0.0% 22.3% 14.3%
Logistics 33.0 54.0 31.0 -6.1
q-o-q growth -45.0% 0.2% -42.6%
contribution 12.3% 16.3% 9.8%
Total gross profit 268.0 332.0 315.0 17.5
q-o-q growth 20.2% 10.7% -5.1%
Source: Company
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Company Focus
Noble Group
Sales Gth (%) (13.6) 24.6 16.8 11.0 Non-Cash Wkg. Capital 3,634 3,558 3,993 4,310
EBITDA Gth (%) (21.6) 9.7 26.1 20.0 Net Cash/(Debt) (2,604) (2,761) (3,191) (3,333)
Opg Profit Gth (%) (12.5) (13.2) 29.0 21.3
Net Profit Gth (%) (3.7) (23.4) 33.1 22.1
Effective Tax Rate (%) 10.5 14.0 15.0 15.0
Cash Flow Statement (US$ m) Rates & Ratio
FY Dec 2009A 2010F 2011F 2012F FY Dec 2009A 2010F 2011F 2012F
Pre-Tax Profit 620 495 667 815 Gross Margins (%) 3.5 3.0 3.4 3.7
Dep. & Amort. 67 89 112 137 Opg Profit Margin (%) 2.2 1.5 1.7 1.8
Tax Paid (65) (69) (100) (122) Net Profit Margin (%) 1.8 1.1 1.2 1.4
Assoc. & JV Inc/(loss) 25 18 12 6 ROAE (%) 23.1 13.6 16.0 17.1
Chg in Wkg.Cap. (1,760) 871 21 31 ROA (%) 5.9 3.7 4.3 4.9
Other Operating CF 443 (798) (460) (353) ROCE (%) 10.8 7.0 8.2 9.5
Net Operating CF (670) 607 253 512 Div Payout Ratio (%) 19.3 25.0 25.0 25.0
Capital Exp.(net) (690) (570) (546) (482) Net Interest Cover (x) 4.2 2.8 3.4 3.7
Other Invts.(net) (15) (10) (11) (11) Asset Turnover (x) 3.3 3.4 3.5 3.6
Invts in Assoc. & JV (31) (29) (28) (27) Debtors Turn (avg days) 12.1 11.4 11.3 11.5
Div from Assoc & JV 0 0 0 0 Creditors Turn (avg days) 43.3 39.2 40.3 41.2
Other Investing CF (443) 0 0 0 Inventory Turn (avg days) 31.4 32.3 29.1 29.5
Net Investing CF (1,178) (610) (584) (520) Current Ratio (x) 1.9 2.0 1.8 1.8
Div Paid (146) (138) (107) (142) Quick Ratio (x) 0.5 0.6 0.4 0.4
Chg in Gross Debt 985 650 (113) (102) Net Debt/Equity (X) 0.9 0.8 0.8 0.8
Capital Issues 694 82 0 0 Net Debt/Equity ex MI (X) 0.9 0.8 0.8 0.8
Other Financing CF (66) (97) 8 7 Capex to Debt (%) 19.5 13.6 13.4 12.1
Net Financing CF 1,467 496 (212) (237) Z-Score (X) 4.8 4.5 4.7 4.8
Net Cashflow (381) 493 (543) (244) N. Cash/(Debt)PS (US cts.) (67.7) (46.4) (53.7) (56.0)
Opg CFPS (US cts.) 28.4 (4.4) 3.9 8.1
Free CFPS (US cts.) (35.4) 0.6 (4.9) 0.5
Quarterly / Interim Income Statement (US$ m) Segmental Breakdown / Key Assumptions
FY Dec 3Q2009 4Q2009 1Q2010 2Q2010 FY Dec 2009A 2010F 2011F 2012F
Turnover 8,361 9,567 11,401 12,917 Revenues (US$ m)
Cost of Goods Sold (8,046) (9,267) (11,069) (12,603) Agriculture 7,367 8,796 10,372 11,328
Gross Profit 315 300 332 315 Energy 18,206 24,312 28,207 31,174
Other Oper. (Exp)/Inc (117) (123) (142) (200) MMO 4,726 4,904 5,866 6,841
Operating Profit 197 177 190 114 Logistics 884 855 944 1,040
Other Non Opg (Exp)/Inc 11 (27) 31 79
Associates & JV Inc (4) (6) (3) 0 Total 31,183 38,867 45,390 50,383
Net Interest (Exp)/Inc (54) (17) (61) (69) Gross Profit (US$ m)
Exceptional Gain/(Loss) 0 (28) (28) (28) Agriculture 344 306 523 712
Pre-tax Profit 151 99 129 97 Energy 449 551 648 728
Tax (19) (16) (14) (10) MMO 136 157 167 202
Minority Interest 0 2 0 0 Logistics 177 171 189 208
Net Profit 132 85 115 87
Net profit bef Except. 132 113 143 114 Total 1,105 1,185 1,527 1,850
EBITDA 242 207 268 197 Gross Profit Margins (%)
Agriculture 4.7 3.5 5.0 6.3
Sales Gth (%) 16.5 14.4 19.2 13.3 Energy 2.5 2.3 2.3 2.3
EBITDA Gth (%) 46.5 (14.6) 29.4 (26.4) MMO 2.9 3.2 2.9 3.0
Opg Profit Gth (%) 31.9 (10.4) 7.7 (39.9) Logistics 20.0 20.0 20.0 20.0
Net Profit Gth (%) (46.9) (35.8) 35.6 (24.8)
Gross Margins (%) 3.8 3.1 2.9 2.4 Total 3.5 3.0 3.4 3.7
Opg Profit Margins (%) 2.4 1.8 1.7 0.9 Key Assumptions
Net Profit Margins (%) 1.6 0.9 1.0 0.7 Agriculture gross profit/MT, 21.5 15.0 21.8 27.7
Energy gross profit/MT, US$ 6.2 6.4 6.8 7.3
MMO gross profit/MT, US$ 4.0 5.5 5.6 5.6
Logistics gross profit/MT, 2.7 2.5 2.6 2.7
Vol. growth (ex-logistics), % 27.4 13.1 8.6 7.5
Source: Company, DBS Vickers
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Company Focus
Noble Group
DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
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ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of
his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of
13 Aug 2010, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the
securities recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions).
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Company Focus
Noble Group
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