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What else might Iceberg have got right?

Noble - still no explanation as to why there was no profit warning

Wednesday, March 4, 2015 - 10:52

It's been two days since I asked why Noble Group did not issue a profit warning if it knew the market's forecasts were hugely off the mark (BT Hock Lock Siew, 2 March "Noble's shock Q4 loss - why no warning?'') and the company has not yet responded. I find this troubling because the longer the silence, the greater the uncertainty in the minds of investors. Perhaps more importantly, it's also possible that the market will then lend greater legitimacy to the claims of Iceberg Research, the short seller who in a 15 Feb report, criticised Noble's accounting for associates and claimed that more writeoffs were needed. 

BT readers would know that since that report was issued, Noble reported a shock US$240m loss for its 4Q, when the average forecast by 13 analysts tracked by Bloomberg was a profit of about US$98m. The large difference was because of a large writeoff - which was in principle exactly what Iceberg said needed to be done. In other words, Noble says that Iceberg was completely off the mark and its reasoning is badly flawed but then did something which Iceberg recommended.

As some observers have quite logically asked - if Iceberg got it right on the need to write down the value of associates and long-term investments, what else might they have got right? As I said in the Hock Lock Siew, the faster these questions are answered, the better.