Noble

Noble: Goldman highlights earnings risk in 4Q14, but improving 2015 outlook While a certain degree of price volatility is positive for trading margins (e.g., creates arbitrage opportunities), extreme commodity price volatility can be negative for margins (e.g., higher counterparty risks). As such, the sharp decline in oil prices in 4Q14 (-40%) may cause some downside risks to Energy earnings. Furthermore, the decline in the broader commodity prices such as thermal coal and iron ore has increased asset impairment risks. However, GS notes that Noble’s outlook for 2015 is improving due to: 1) oil ‘super-contango’ (traders can leverage the curve by buying and holding the commodity); 2) improving supply-demand factors (oil supply abundant, high demand); 3) rising volume offtakes (metals, coal, oil); 4) lower interest costs (lower gearing post the Agri division’s stake sale); and 5) lower working capital requirements (lower commodity prices). GS maintains BUY rating, but lowered its TP to $1.45 (from $1.55).