• 1Q earnings met 32% of FY forecast
• Agri-business now restated as investment
• Maintain HOLD and S$1.31 FV

Restated 1Q13 figures

Noble Group (Noble) reported its 1Q14 results last evening, which reclassified its Agricultural business as operations held for sale, thus causing its 1Q13 figures to be restated. Revenue slipped 7.2% YoY to US$17,956.2m, mainly dragged down by its Metals, Minerals and Ores (MMO) business (revenue down 39%, tonnage down 27%). Nevertheless, the continued focus on profitability saw operating income from supply chains improving 30% to US$497.5m; margin also improved from 1.98% in 1Q13 to 2.77% in 1Q14. Profit from continuing operations climbed 5.8% to US$232.3m, while net profit jumped 268.7% to US$152.3m; this meeting 32.4% of our fullyear forecast.

Improved profitability across all segments

Despite the sharp drop in MMO revenue and tonnage, we note that profitability has improved sharply; management attributed this as a result of successful product diversification and build out of a portfolio of long-term purchase agreements. In particular, aluminium premiums reached record levels in 1Q14, allowing the division to lock in good margins. As for its Energy business, while revenue and tonnage were pretty flat, profitability also improved, with operating income margin rising to 2.91% from 2.52% in the year ago quarter. Losses in Agri business narrowing As for its Agri business, which Noble now has a deal to dispel a 51% stake in Noble Agri Limited to COFCO (HK), also posted improved profitability, with losses narrowing 37% to US$42m; this buoyed by a solid performance in South America (although somewhat mitigated by a very weak crushing environment in China). While management did not give any updates on the progress of the stake sale, the deal could still take a while.

Maintain HOLD with new S$1.31 fair value

At the moment, we hold off making any major revisions to our estimates until we get a better sense of its continuing business reporting format. Nevertheless, our fair value improves from S$1.26 to S$1.31 as we roll forward our 13.5x peg to blended FY14/FY15F EPS. Maintain HOLD.

Source: OCBC Research - 16 May 2014