Results in-line with expectations. Noble's 2Q12 core PATMI grew 10% YoY to US$145m (+7% QoQ) and accounted for 27% of our full year estimates (versus 24% for consensus) while top line grew 23% YoY to US$24.2b (+6% QoQ). 2Q12 also saw supply chain asset gains (excluded from core earnings) of US$50m and a deferred tax credit of US$36m arising from the Gloucester '
Yancoal merger. 1H12 core earnings accounts for 52% of our full year estimate. We expect continued strength in 2H12 with improvement in weather and extension of Sugar crushing period to boost contribution from Agriculture. Maintain BUY with TP of S$1.60 based on 14.7x core FY12 EPS, an 8% premium to its five year historical average P/E.

Continued weakness in Agri, expecting better outlook in 2H12. Agri operating income from supply chain fell 69% YoY to US$51m (+8% QoQ) due to (1) wet weather in Brazil affecting sugar harvest, and (2) poor crushing margins in China. Crush margins in Argentina benefitted from tighter market conditions. Management has maintained its full year sugar production targets for FY12 and will operate its mills for an extended two months to meet this target. We expect Agriculture profits to strengthen in 2H12, with ramping up of sugar crushing, though China crush margins could remain muted.

Energy performed; balance sheet strengthening from US$800m cash. Energy operating income from supply chain grew 37% YoY to US$314m (-10% QoQ) on the back of expansion of its Oil, Gas & Power division. Separately, Noble's receipt of cash over the next six months from the Yancoal merger and other asset disposals will total ~US$800m, strengthening its balance sheet. As of 30 Jun 12 Noble has US$1.4b in cash with net gearing at 0.88x.

Valuations remain attractive. At 11.0x FY12 P/E, Noble is trading below its five year historical average of 13.6x, and below its peer average of 12.0x. We believe continued strength in earnings will drive an upward re-rating for Noble.