Noble

Noble: CS views the disposal as a significant positive as our key concern for Noble has been earnings weakness in the Agriculture division, which made a loss of US$367m in 2013. On completion, Noble Agriculture will become an associate of the company, which is a major step in the execution of its asset light strategy. An initial cash payment of US$1.5b will be paid to Noble, which will be used to repay debt and redeployed to other platforms. Also expect the market to focus more on the highly profitable Energy and MMO platforms, which had a ROE of 26% in 2013. The house upgrade Noble to OUTPERFORM, wth a new target price of $1.50, based on a SOTP valuing the Agriculture business at the transaction equity value, and the remaining businesses at 2013 P/B of 2.0x. Noble: CLSA note that With Noble selling 51% of Noble-Agri for US$1.5b, this effectively removes the risk of a goodwill write down as well as a key earnings drag on its business. The deal will allow them to refocus their core operations of being a Hard Commodities trader, as well as reduce their gearing ratios and asset intensity. CLSA sees an earnings uplift of 12-33% from the transaction. With overhangs removed, the house raise its valuation multiples for Noble to 11x PER and 1.1x PB to reflect the healthier B/S and stronger earnings profile. This brings our TP to $1.34, upgrade to O-PF. Noble: Maybank-KE maintains Hold with $1.13 TP. The house admit that strategically the partnership could be positive because Noble could widen its revenue source being COFCO’s principal international origination platform. However do not think the timing is ideal for this deal. Noble just experienced the worst year for its agi division in FY13 with US$83m gross loss and US$377m net loss and the house believe the valuation has hit a trough. Although at 15% premium to book value, COFCO’s US$3b valuation for Noble’s entire agri business still look cheap. Believe Noble’s sugar and soybean crushing assets alone should worth around US$3b. Adding palm oil plantation and other trading assets, the whole agri division should at least worth USD3.5-4b. 1.15x P/BV is also much lower than Temasek’s recent offer for Olam at 1.4x p/BV. Maintain HOLD with TP SG$1.13, pegged to 1x FY14E P/BV