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Noble Group sinks as brokers cut price targets after PwC report
[SINGAPORE] Noble Group Ltd declined as brokerages lowered their price targets for the stock even after the commodity trader published an auditor's report supporting its accounting practices.
The shares fell 2.6 per cent to 56.5 Singapore cents as of 4:34 pm local time, wiping out earlier gains. The stock had jumped as much as 11 per cent on Tuesday as Noble was said to hire dealmaker Michael Klein to review options including raising financing from banks or selling a stake in the company, a person familiar with the matter said. PricewaterhouseCoopers LLP's report stated the firm complied with international rules in valuing long-term contracts.
"While we take comfort from the rigorous manner in which Noble conducts its valuations as disclosed in the PwC report, we believe it may not be sufficient to regain the market's confidence in the near term," Mervin Song, an analyst at DBS Vickers Securities in Singapore, wrote in a note to clients.
DBS cut its price target for Noble Group to 57 Singapore cents from 95 Singapore cents, joining other brokers including Maybank Kim Eng Holdings Ltd, OCBC Securities, UOB-Kay Hian Holdings Ltd and Morgan Stanley. The shares may climb to 79 Singapore cents in the next 12 months, according to the average forecast by 11 brokerages tracked by Bloomberg. That compares with 98 Singapore cents last week.
While supporting Noble's accounting practices, PwC qualified its assessment by saying the trader needs to improve governance and the methodology it uses to value the deals.
Second-quarter profit fell amid a slump in commodity prices, the trading house said Monday. Maybank Kim Eng said the results were disappointing, with the first-half profit accounting for just 37 per cent of the brokerage's full-year forecast.
"The energy coal market remains challenging as demand from China continues to decline," Wei Bin, an analyst at Maybank Kim Eng in Singapore, wrote in a note to clients.
The stock is the most shorted on the Straits Times Index, with short interest as a per centage of outstanding shares climbing to a record 14.1 per cent on Aug 6, Markit Group Ltd data tracked by Bloomberg show. The shares jumped 27 per cent last week, the most since May 2009, after the company brought forward its results announcement.
Noble said on Aug 3 that it had "been approached by a number of parties in terms of potential financings, and strategic and/or investment options."
"We could see a further rebound in the shares especially if a deal gets done," said Nicholas Teo, a strategist at CMC Markets in Singapore. "That could further squeeze short- sellers."
Noble has lost about half of its value since mid-February, when a group calling itself Iceberg Research published criticism of the firm's accounting. The company has bought back S$131 million of its shares since June and hired PricewaterhouseCoopers LLP last month to review its practices.