Results below our expectations. Noble's 3Q12 core PATMI came in at US$67m (-54% QoQ) versus core PATMI losses of US$35m in 3Q11 and accounted for 12.4% of our full year estimates (and 11.5% for consensus). The disappointment was broad based ' (1) slower than expected pick up in Agri and MMO profits, and (2) sequential decline in Energy profits. We trim our FY12 and FY13 earnings by 17% and 24% respectively on a lower commodity price environment that could pressure margins going forward. We lower our TP to S$1.45 (from S$1.60 previously) based on 13.5x core FY13 EPS, equal to its five year historical average. Maintain BUY rating. Though we expect some near term share price weakness following this set of results, this could result in a buying opportunity for investors. Positives in FY13 could come from stronger contribution from Agri as well as annual cost savings equivalent to US$100m coming mainly from improved management of SG&A expenses.

Muted performance from Agri, but expected to pick up. 3Q12 Agri operating income from supply chain was up 3% YoY to US$70m (+38% QoQ) due to better performance from the Brazillian sugar mills. The mills continue to compensate for processing lost during 1H12 period and we are expecting sequential improvement in this space to continue. However Agri profits may continue to be weighed down by still weak crushing conditions in China.

Energy profits down sequentially. 3Q12 Energy operating income from supply chain grew 42% YoY to US$219m but was down 30% QoQ. Part of the sequential fall in profits could be attributable to lower Newcastle benchmark coal prices which have declined 28% YTD to c.US$80/tonne.

Valuations still attractive. At 11.8x FY13 P/E, Noble is trading below its five year historical average of 13.5x. We believe any sell-down following this result could be short term and provides a buying opportunity for investors.

Source: OSK