• CIC sold 300m shares at S$1.32 each
• COFCO JV may be reason for sale
• Maintain HOLD and S$1.31 FV

Completes Agri business 51% stake sale

Noble Group (Noble) has completed the sale of its Agri business to COFCO on 30 Sep 2014; this at a price of 1.15x of 51% stake of the audited book value (FY13), or an initial payment of US$1.5b, which was also in line with the original announcement made in Apr, subject to final adjustments after the deferred settlement date (14 Oct 2014). Recall that the deal will also create a JV that will become COFCO’s principle base for sourcing food materials globally, which effectively combines Noble’s broad origination base and pipeline and risk management capabilities with COFCO’s leading access to the Chinese consumer.

CIC pares stake with 300m share sale

Separately, China Investment Corp (CIC), through its subsidiary Best Investment Limited, has pared its stake from 13.8% to 9.4% by selling 300m shares at S$1.32 each (lower end of an indicative S$1.32-1.35 range). Noble said it will release the notification of the change in CIC’s interest as soon as it receives the same from CIC.

Portfolio rebalancing exercise

The share sale sent Noble’s share price tumbling some 9.3% to S$1.27, before recovering slightly to close at S$1.30. Noble says it understands that the placement is part of CIC’s overall portfolio rebalancing exercise, and CIC will continue to support Noble’s business strategy. However, CIC is likely to have made a slight loss on the move – this as it paid S$2.11 for its stake back then in 2009 (or S$1.37, adjusted for the 6-for-11 bonus issue).

Maintain HOLD with unchanged S$1.31 fair value

We also opine that the stake sale could be due to the Agri JV with COFCO; this probably reduces the need for CIC to own such a large stake in Noble anymore. Nevertheless, we maintain our HOLD rating and S$1.31 fair value (based on 13.5x FY14/FY15F EPS) as we believe that Noble’s core business is stabilizing, although near-term catalyst may still be lacking as China’s economic growth remains splotchy.

Source: OCBC Research - 1 Oct 2014