Noble

Noble: CLSA upgrading the counter to Buy this morning, following the 20% price correction. Near term worries masks the re-structuring story taking place, where the house holds the view that these concerns, while valid, are obscuring the 3-yr restructuring story. The 51% sell-down of Noble Agri, and the disposal of Gloucester coal in 2012 has largely removed Noble from the upstream side of the commodity industry, which will reduce its exposure to declining commodity prices. In effect, it is returning to its roots of being an asset-light trader rather than banking on commodity price increases to drive profitability. With US$3.5b (50% of mkt cap) in cash coming in due to recent stake sales, and 2 private equity vehicles (X2 and Harbour Energy) helmed by some of the best management in their respective Industries, Noble has a good potential pipeline of new investments. This could potentially add 15-22% to Noble’s earnings. While the share price decline was due to near-term issues, advise investors to focus on the medium-term re-structuring story that is playing out. Furthermore, at just 8.4x 15 PE, it is at a sharp discount to historical avg. PE