Noble Grp

Noble Grp: Announced good set of 2Q11 results which was in-line.

Rev at US$19.7b, +52% yoy and -2.5% qoq, while Net Profit at US$139.8m, +63% yoy and -31.9% qoq. Operating income margin dropped slightly to 2.33% vs 2.44% yoy and 2.27% qoq.

Strong top line was led by an increase in grp’s total Vol tonnage at 47.8m mt, +8.9% yoy and -4.6% qoq, with grp’s Energy and Agriculture segments continuing to perform, with tonnage sold at +49% and +5% respectively, although MMO segment continued to faced more difficult trading conditions with tonnage -6% yoy. Energy segment continued to be the main contributor at 58.4% of grp's total rev, while agriculture at 26.4%.

Lower qoq Net Profit attributed to grp’s disposal of fleet mgt business in 1Q11. Net finance costs substantially reduced to US$82m in 2Q11 from US$118m in 1Q11, reflecting grp’s efforts to lower interest expenses. Cash conversion cycle improved to 6 days from 12 days while Net gearing was reduced to 51.4% from 53.2% (Dec10), with an acceptable current ratio of 1.65x, suggesting headroom to gear up for future acquisitions.

We note that valuations are compelling, with grp trading at an annualized 7.5x FY11E P/E vs historical average of 12.1x. HSBC maintains O/w but reduce TP to $2.06 from $2.74 and Citi maintains Buy with $2.36 TP.