Noble

Noble: Maybank TV interviews Simeon Ang, investment analyst at Maybank-KE, who shares his views on embattled commodity trader, Noble Group.

Overview:
1) Asset valuations are at the core of the Noble’s current predicament. Critics have pointed out two major assets that appear to have questionable valuations - ASX-listed Yancoal, and Noble's long term commodity contracts.

2) Long term commodity contracts are generally more difficult to value due to the uncertainty of its underlying price and discount assumptions. The large fair value gains that Noble booked in the past is a concern as it constituted 82% of its NAV. Taking a conservative 50% hair cut on these unrealized gains, NAV would drop to US$0.46 (1Q15: US$0.76), which would put its current current price at a slight discount.

3) Potential removal from the FTSE STI constituent list appears to be a more pressing issue for investors as once deleted, index fund managers will have to start selling their holdings, adding further pressure to the stock.

4) To address the issues, Noble will be releasing its earnings and review results on 10 Aug, earlier than previously announced. With commodity prices at near 52-week lows, there is room to debate the commodity investment theme.

5) Weak commodity prices from falling demand in China could ultimately affect shipments, thereby impacting on trading volumes. In particular, aluminium, sugar, and cotton, all of which Noble trades in, have seen better days.

6) For commodity exposure, investors should look to CPO counters such as Bumitama Agri (Buy, TP: $1.14) and First Resources (Buy, TP: $2.22).

The video can be accessed via the following link below:
https://www.youtube.com/watch?v=ftRpzH-rr8o