• 1Q NPAT met 28% of FY15 forecast
• Better disclosure on business, revaluation
• Buyer at $0.85 or better

1Q15 results mostly within forecast

Noble Group (Noble) reported its 1Q15 results last night, which broadly matched our forecast. Revenue slipped 7% YoY to US$16640.6m, meeting about 19% of our FY15 estimate – note that 1Q is typically the seasonally weaker quarter. Although volumes were again up, with Noble moving around 65.8m tonnes (versus just 39.3m in 1Q14), revenue was impacted by lower commodity prices. Nevertheless, operating margins held quite steady at around 2.5% in the quarter versus 2.9% in 1Q14; but was an improvement from the 1.7% seen in 4Q14. Still, net profit came in 30% lower at US$106.6m, mainly due to higher losses from associates (mainly from Noble Agri); but still met around 28% of our full-year forecast.

New business segmentation and more disclosures

For this quarter, Noble has further divided its existing businesses into more distinct segments. For example, Energy has been split into Energy and Gas & Power, MMO into Metals and Mining, as well as a new Corporate & Others segment. In addition, it has made available EBIT numbers for the various segments. Noble has also provided more information about its Net Fair Value Gains & Losses, breaking these down into segments and regions, as well as giving movement details of what has been booked in the quarter. Currently, Noble notes that there is a decline of US$393m in net fair value gains due larger to the roll-off of short-term contracts in Oil Liquids. However, we believe that the market will still need time to fully make sense of these numbers and how relevant these are to understanding the company’s business.

Secures commitment for US$2.25b loan facility

Separately, the group announced that it has received full commitment for its revolving credit facility of US$2.25b; hence the syndication will proceed based on the original timeline to finalize documentation and complete the syndication process. As of 31 Mar, Noble has about US$2.26b of debt maturing within a year.

Maintain HOLD with S$1.05 fair value

As the numbers were mostly in line with our expectations, we opt to keep our estimates unchanged. We also maintain our HOLD rating and S$1.05 fair value (based on 13.5x FY15F EPS); we would be buyers at around S$0.85 or better.

Source: OCBC Research - 6 May 2015