Within expectations. FY12 results were within market expectations, though short of our estimates. While this should not be considered a good year by Noble’s earlier standards, recurring net profit of USD472 was up 47% yoy, marking a good recovery from FY11. This should also be seen in light of a very challenging year for its Brazilian sugar business and the record low VARs deployed. 4th quarter recurring net profit came in at USD92m.

Agricultural segment underperformed. Operating income from this segment was down 62% yoy. 4th quarter’s operating income in particular, was a record low in recent years. We believe the Brazilian sugar business was hampered by weather conditions as well as low sugar prices. Volume expansion is on track, with full utilization expected in FY14. Operating leverage should drive bottom-line next year.

Energy opportunies. The energy segment saw a 31% yoy growth in operating income, as volume grew, particularly from energy coal. Management continues to develop new coal offtake agreements in new markets in Africa and Mongolia while keeping a close eye on US shale gas opportunities, where it can leverage on its existing pipelines, storage facilities and insight in this area.

Asset lighter strategy. Management appears to be advocating an asset lighter strategy going forward. Capex commitments of USD500m over the next two years, partly for new oilseeds crushing plants outside China, represents a major downshift from previous years. This should strengthen its balance sheet even further. Adjusted net debt/ equity was just 35% (28% taking into account cash receipt in Jan 2013 from the Yanzhou-Gloucester deal).

Maintain BUY. We believe a more conducive environment to deploy higher VARs, recovery in key product markets and maangement’s cost rationalization drive should imply profit upside in FY13. Management’s asset lighter strategy, and consequently lower gearing should also find favor with the market. We adjust our FY13-FY14F estimates downward by 7%/4%. Our new TP of SGD1.48 is pegged to 13x FY13F, in line with historical mean. Maintain BUY.

Source: Maybank Kim Eng Research - 01 Mar 2013