Monday, December 23, 2013
Noble Group: Noble spun-out Gloucester Coal in 2012 for a 13% stake in Yancoal Australia and CLSA believes that a recent change in government regulations may see the risk of Noble losing a marketing agreement with Yancoal, making up ~4% of Noble’s EBIT. 78% majority owner Yanzhou Coal is proposing to buy-out Yancoal. While this deal would have been blocked by Australia’s Foreign Investment Review Board given that Yanzhou Coal committed in 2009 to list at least 30% of its assets in Australia by end 2013, Australia’s Treasurer, Joe Hockey, has retroactively removed that restriction from Yancoal on 11 Dec 2013, effectively giving the green-light for Yanzhou Coal to take Yancoal private completely. If Noble do lose ownership over Yancoal, Noble will lose a key negotiating angle for getting the marketing rights to future coal volumes. While the marketing operations for this business is only around 20mt of coal (vs. Noble total energy vol. of 135mt), and ~4% of EBIT, CLSA expect further headwinds to come given that control is now in Yanzhou Coal’s hands. CLSA maintain Sell with $0.87 TP.