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By Lee Wen Ching
Wed, 24 Feb 2010, 09:29:14 SGT
Noble Group’s (Noble) FY09 results were in line with expectations. Revenue contracted by 13.6% to US$31.2b due to lower commodity prices in 1H09, while core net profit declined by a marginal 1.8% to US$429.7m from the record high US$437.8m in FY08. The group’s FY09 performance was buoyed by its 2H09 earnings, which staged a convincing rebound as global economies recovered. Moving into 2010, we expect earnings growth momentum to be driven by contributions from recent pipeline investments as well as improving demand for commodities amid the global economic recovery. The group has declared a cash dividend of 3.6 US cents and scrip dividend of 6 shares for every 11 shares held. We maintain our BUY rating on Noble and raise our fair value estimate to S$3.75. FY09 in line with expectations. Noble Group (Noble) delivered a good set of 4Q09 results with revenue growing 40.9% YoY to US$9.6b. Gross profit gained 54.2% YoY to US$299.6m, while core net profit jumped 71.1% YoY to US$112.6m. For the full year, revenue contracted by 13.6% to US$31.2b due to lower commodity prices in 1H09, while reported net profit retreated by 3.7% to US$556.0m. Excluding non-core items from both FY08 and FY09, we estimate that core net profit would have declined by a marginal 1.8% to US$429.7m from the record high US$437.8m in FY08. Noble’s core FY09 earnings were within 3% of our estimate. The group has declared a cash dividend of 3.6 US cents and scrip dividend of 6 shares for every 11 shares held.
Energy was the star performer. The main highlight of Noble’s 4Q09 results was its Energy segment’s stellar performance. Revenue jumped 71.1% YoY to a record high, driven by the expansion of its Coal & Coke division as well as growth of its Oil, Gas & Power division. The Metals, Minerals & Ores (MMO) segment too turned in laudable results with a return to profit from losses incurred during the trough of the downturn a year ago. Agriculture was the weakest link in 4Q09, as revenue and gross profit declined due to a drought in Argentina which limited its origination volume. Nevertheless, management indicated that the environment has improved and expects robust performance going forward. Total tonnage handled by the group in 4Q09 jumped 40.8% to 46.9m MT, underpinned by its robust competitive positioning and aided by recent pipeline enhancement initiatives.
Economic recovery will support growth momentum. Noble’s earnings have staged a convincing rebound in 2H09 along with the global economic recovery. We have touted the stock to be a proxy to the economic recovery and reiterate our view that earnings growth will be driven by contributions from recent pipeline investments as well as improving demand for commodities amid the global economic recovery. The stock has surged by 200% over the last year, vastly outperforming the STI’s 70% gain. Nevertheless, valuations remain reasonable at 14.1x FY10F PER vs. the STI’s 14.8x PER and its closest peer Olam’s 22.4x PER. We continue to like Noble for its proven execution, strong balance sheet and sound diversification. We maintain our BUY rating on the stock and raise our fair value estimate to S$3.75 (from $3.73).
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