Noble Grp

Noble Grp: (The Edge) Strengthens balance sheet as outlook of agri-commodities brightens. CEO note that weather outlook for grains and oilseeds is positive this yr, with Argentina experiencing light rains that has eased soybean prices. Looks like earnings driver will be frm the agri segment. Aims to open 3 new oilseed crushing plants in Brazil, South Africa and Ukraine, which will augment grp’s existing crush footprint and increase its origination flexibility. Expects crushing capacity to increase by 43% this yr to 10mil tons as new plants comes online. Contributions from grp’s Sugar supply Chain in Brazil are also expected to be stronger in FY13 as the co. ramps up production. Aims to ramp up sugar crushing utilization to 100% by FY14 vs current 65%. Highlight that grp intends to stay asset light with no intention to fully own assets along a supply chain, which could increase ROE and allow grp to stay focused on managing the SS chain. Most analysts are bullish on the Co, with 12 Buy Calls and 5 Holds and 3 Sells among the 20 analysts who cover it. See room for earnings expansion from grp’s agriculture segments’ profit recovery and incremental improvement in China’s commodity demand. CIMB maintains O/P with $1.47 TP. House note that slower economic activity, heightened risk aversion and earnings disappointments have pinned Noble’s share price near to all-time lows. The IMF now projects an acceleration of global growth in 2013-2014, suggesting that Noble’s fortunes could be turning. Against a backdrop of low expectations and low ownership, any positives from earnings surprises and a return of risk appetites could spark Noble’s rerating. House maintain Outperform rating, EPS estimates and target price (10.1x CY14 P/E, 0.5SD below the 5-year mean).