Noble

Noble: Noble has released an announcement in rebuttal to Muddy Water’s latest allegations as follows:

1) Reject the assertion that Noble exists to borrow and burn cash – The group opines that its balance sheet has never been stronger, highlighting that over the past 20 years, Noble has grown from a company with $377m of revenue to revenues of more than $85b.

Muddy Waters have also omitted the impact that the Agri business has had on Noble results over the last few years and most importantly, the free cash flow metric quoted in their report incorrectly omits the ~$3.4b of cash proceeds received from the sale of its 51% interest in Noble Agri.

2) Reject the notion that Noble’s debt levels are unsustainable - As at the end of Dec ‘14, Noble’s debt to capitalizations was at a historic low of 38%. Also the group carried $5.2b of liquidity headroom. In terms of debt profile, half of the outstanding debt has a maturity of over 2 years.

3 Reject the assertion that Intra Quarter Debt levels increase by $3b – While Noble acknowledges that its debt does fluctuate intra-quarter, however this is more a reflection of market practice, and nowhere near the $3b claimed.

4) Reject the unfounded allegations that Noble misled investors or manipulated the accounting in the acquisition and disposal of PT Alhasanie - The acquisition and disposal proceeds of PT ALH, and the accounting of them, are fully explainable through arms length commercial arrangements and third party independent valuations.

Separately, the Business Times highlighted that the report by Muddy Waters coincides with the launch of a US$2.25b committed unsecured revolving loan facility by Noble on Wednesday, with analysts highlighting that investors will likely be watching the costs and subscription levels of the facility, to gauge lenders’ confidence on the commodities trader.

Overall, Maybank-KE opines that there is nothing really new in Muddy Water's allegation, while we do not have comments on the behavioural analysis by Qverity, given that we are not experts in this field.

Maybank-KE currently have a Hold rating on Noble with TP $0.96. While valuations are undemanding at 8.3x forward P/E and 0.9x P/B, the house would prefer to wait for the dust to settle regarding Noble’s allegations.