Don't Compare Noble to Glencore, Analyst Says

  • Singapore-listed company is middleman, Attavar says in note
  • There's a `fairly crowded short position' in Noble, he says

Noble Group Ltd.’s recent shares losses, when Asia’s biggest commodities trader dropped in tandem with Glencore Plc, may represent an anomaly as the companies are different, according to Jefferies Group LLC.

While most of Glencore’s asset base and earnings come from mining and the business is significantly affected by swings in raw materials, Noble is mostly a supply-chain manager, analyst Abhijit Attavar said in a report. That means the Singapore-listed company is a middleman who takes little direct price risk in commodities, according to Attavar.

Glencore’s shares sank to a record last month amid concern that the company may struggle to repay debt as commodity prices languished near multiyear lows. In Singapore, Noble also plunged, exacerbating declines from earlier this year that were spurred by criticism of its accounting practices and short-selling.

“Driving down Noble’s share prices to reflect a weak commodity price cycle therefore represents a fundamental anomaly,” wrote Attavar, who has a target of S$1.30 on the stock, more than twice its present level. There remains a “fairly crowded short position” in Noble that’s vulnerable to a short squeeze should there be any positive catalyst, he said.

Shares in Noble gained 4.2 percent to 49.5 Singapore cents on Thursday, rising for a second day. After Glencore plunged 29 percent in London on Sept. 28, Noble fell 10 percent in Asia the next day.

Noble Chief Executive Officer Yusuf Alireza said on Wednesday he should have been more forceful in pushing the trader to boost transparency as the company fended off the attacks over its accounting and battled the share-price slump. Most of Noble’s rivals are private and didn’t face the same scrutiny, said Alireza.

Before it's here, it's on the Bloomberg Terminal.