• 1H NPAT met 44% of FY15 forecast
• Outlook for commodities remain muted
• Lower FV of S$0.60

Slighter softer-than-expected 1H15 showing

Noble Group (Noble) reported its 2Q15 results last evening, with revenue slipping 22% YoY to US$18,375.0m, mainly due to lower commodity prices; it noted that it continued to ship some 67m tonnes, driven by its Energy business. But due to larger-than-expected losses posted by associates (which widened by 185% YoY to US$67.7m), NPAT eased 5% to US$62.6m.

In 1H15, Noble posted a revenue of US$34,997.6m, down 16%, and meeting 40% of our full-year estimate; reported NPAT came in at US$169.2m, down 22%, or about 44% of our FY15 forecast; note that Noble also recorded a net fair value decline of US$487m in 1H15.

Main drag from Metals & Mining segment

Besides the continued losses suffered by Noble Agri (reflected in the Associates line), we note that the main drag on its 2Q15 results came from its Metals & Mining segment; this as it reported an operating loss of US$19m and a negative EBIT of US$50m (versus operating profit of US$161.1m and EBIT of US$108.6m in 2Q14).

Management attributed the loss to the difficult quarter in its Aluminium business where premiums for metals in key distribution locations weakened sharply.

Releases PwC report in full

Separately, Noble has released the entire PwC Assurance Opinion and accompanying Management Report, noting that PwC stated that "the individual valuations and overall valuation of the contracts including in the group's consolidation balance sheet as at 30 Jun 2015 comply in all material respects with the relevant criteria".

Noble added that PwC reviewed 12 areas to assess contract valuations and also looked at 35 relevant criteria; these include volumes, price, discount rates and reserves.

Still likely stuck in bearish commodities market

In view of the bearish outlook for the commodities market in general, we deem it prudent to pare our FY15 estimates for revenue by 11% and NPAT by 17% (FY16 revenue by 6% and NPAT by 11%). This in turn lowers our fair value from S$0.69 to S$0.60 (now based on 9x blended FY15/FY16F EPS). Maintain HOLD.

Source: OCBC Research - 11 Aug 2015