David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

Noble Group and Olam often resemble looking-glass versions of each other.

The two Singapore-listed traders -- Noble specializing in hard commodities such as metals, coal and power, and Olam in soft ones like sugar and nuts -- have grown on the back of debt levels well in excess of more established competitors. Both have also been targeted by bearish equity research shops claiming their shares are worthless. Both have, so far, survived.

Once you start looking at capital markets, though, the resemblance ends. While Noble's shares have fallen to be worth less than a quarter of its net assets over the past year, Olam has barely broken the buck:

Slipping Through the Net
Olam's shares have kept in line with its net asset value, based on price-book ratios. Noble's have slumped
Source: Bloomberg

The picture's even more stark on the debt side of things. While yields on Noble's 6.75 percent bonds due 2020 peaked at 36 percent in January and are still north of 14 percent, those on Olam's 7.5 percent notes due that same year touched a record-low 4.1 percent Friday. And while last year's freak out over commodity-related leverage threatened to swamp the likes of Noble and Glencore, Olam's debentures barely rippled.

Don't Worry, Be Happy
While Noble's bond investors have freaked out over the past year, Olam's appear to have been asleep
Source: Bloomberg

No one should underestimate the scale of the challenges facing Noble. Its shares fell to a 13-year low last week ahead of Thursday's announcement of a $55 million second-quarter loss. Founder Richard Elman has taken to quoting Churchill's line about having "nothing to offer but blood, toil, tears and sweat" in his letters to shareholders, who might be hoping for some dividends or capital gains besides.

A Lever Long Enough
Net debt-to-shareholders' equity at Olam and Noble has long been well above more established rivals
Source: Bloomberg

Still, the company's managers would be entitled to look at Olam's ability to breeze through the commodities crash with a degree of envy.

Its gearing has always been substantially higher than Noble's, and while Elman has reined in capital spending and started selling the family jewels to get his balance sheet back in order, Olam's Chief Executive Officer Sunny Verghese just keeps on buying stuff -- a wheat-milling business in Nigeria here, an edible-oils business in Mozambique there and a peanut-shelling company in Alabama as well.

Turning a Corner
Noble's trailing 12-month free cash flow plumbed the depths last year but has been improving. Olam's has gone sideways in negative territory.
Source: Bloomberg data, company reports
Note: The companies use different reporting standards for FCF. Figures shown are cash flows from operations net of capital expenditures. All figures taken from Bloomberg data except for Olam figures for 3Q13, 4Q13 and 2Q16, which are from company reports, converted into USD at the balance sheet date.

About S$555 million ($413 million) in cash went out the door in the form of capex net of disposals in the six months through June, Olam said Friday -- quite a contrast to Noble, which had a $686 million inflow over the period, mainly due to the sale of its agriculture business. Trailing 12-month free cash flow is actually now looking healthier at Noble, with Olam akin to an M&A addict who can't break the habit.

Verghese's trump card here is Singapore Inc. Temasek, the city-state's investment firm, owns just over half of Olam and Mitsubishi Corp. has another 20 percent.

That helps explain why those 2020 bonds flipped from a discount to par to a premium in March 2014, when Temasek made its bid for control. It's also the reason Verghese has had a blank check to keep investing in businesses such as Archer-Daniels-Midland's cocoa unit, despite the more bearish outlook for commodities. Olam has now spent S$2.7 billion on investments in the eight quarters since March 2014, more than it shelled out in the 11 preceding quarters, according to data compiled by Bloomberg. 

A deep-pocketed patron is a nice thing to have, but Elman, Noble's biggest shareholder with about a fifth of the stock, hasn't been as lucky. State-owned China Investment Corp. maintained its roughly 10 percent stake in Noble's recently completed $500 million rights issue. Still, it didn't pump in cash via a placement or even take an underwriting role.

If Elman needs a sugar daddy, he could do with one as generous as Temasek.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Holders of Noble Group's junior debt tranches better hope he doesn't start referencing the line about how so much has never been owed by so many to so few.

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David Fickling in Sydney at

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Katrina Nicholas at