Noble Drops as Analyst Support Fades on Loss, Iceberg Report

Noble Group Ltd. dropped to its lowest in a year in Singapore as two analysts cut their rating on the stock to hold, citing weaker-than-expected earnings and concern over a possible third critical report by the anonymous group, Iceberg.

Asia’s biggest commodities trading house fell 3.1 percent to 94.5 Singapore cents at the close, the lowest since Feb. 5 last year, while the benchmark Strait Times Index was little changed. Hong Kong-based Noble has fallen 22 percent since the last trading day before Iceberg released its first report on Feb. 16.

The bid price for the company’s 6.75 percent U.S. dollar bonds due in 2020 has dropped below par, according to traders based in Asia. Bonds indicated a cash price of $98.50 compared to $103 on Feb. 27, the traders said.

Noble is now rated hold by five brokers and a buy by 11, from three holds and 12 buys before the Iceberg report. The consensus 12-month target price has fallen to S$1.37 a share, the lowest since May last year, according to data compiled by Bloomberg.

“If I’m a fund manager, I won’t be buying now because obviously this stock is in the spotlight and another Iceberg report may come out,” Nicholas Teo, an analyst at CMC Markets in Singapore, said by phone. “There have been analysts who’ve downgraded the stock and those assumptions will probably come down further given the overall weakness in the commodity markets.”

$438 Million Writedown

Noble reported its first quarterly loss in more than three years last week, partly because of $438 million in writedowns to reflect the tumble in commodity prices and a plunge in profits at its mining unit.

The impairments included a $200 million loss on Yancoal Australia Ltd., a company in which Noble owns 13 percent, and which was at the center of Iceberg’s criticism. The anonymous group alleged in its first report that Noble overstates the value of associate companies including Yancoal on its books, a charge that the trading house denies.

Noble believes that a “disgruntled” employee fired a year and a half ago is behind the Iceberg reports and it has passed on this information to Singapore’s markets regulator, Chief Executive Officer Yusuf Alireza said on a conference call last week. The company doesn’t plan to pursue legal action itself, he said.

Alireza also refuted allegations in Iceberg’s second report published Feb. 25, which discussed the way Noble handles its cash flow and fair value.

“We believe a near term re-rating for the stock will be difficult, given weaker than expected results, overhang from another Iceberg report, volatility in commodity and FX markets and the need to demonstrate a sustained increase in ROEs,” Mervin Song, an analyst with DBS Group Research said in a Feb. 27 report, in which he also cut Noble’s rating to hold.

OCBC Investment Research Pte was the other broker to cut the rating to hold.

Noble spokesman Stephen Brown wasn’t immediately available.

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