Noble is no Glencore, Jefferies says, with target for rally

[SINGAPORE] Noble Group Ltd's recent shares losses, when Asia's biggest commodities trader dropped in tandem with Glencore Plc, may represent an anomaly as the companies are different, according to Jefferies Group LLC.

While most of Glencore's asset base and earnings come from mining and the business is significantly affected by swings in raw materials, Noble is mostly a supply-chain manager, analyst Abhijit Attavar said in a report. That means the Singapore-listed company is a middleman who takes little direct price risk in commodities, according to Attavar.

Glencore's shares sank to a record last month amid concern that the company may struggle to repay debt as commodity prices languished near multiyear lows. In Singapore, Noble also plunged, exacerbating declines from earlier this year that were spurred by criticism of its accounting practices and short-selling.

"Driving down Noble's share prices to reflect a weak commodity price cycle therefore represents a fundamental anomaly," wrote Attavar, who has a target of S$1.30 on the stock, more than twice its present level. There remains a "fairly crowded short position" in Noble that's vulnerable to a short squeeze should there be any positive catalyst, he said.

Shares in Noble rose as much as 4.2 per cent to 49.5 Singapore cents on Thursday before trading at 49 cents at 3:22 pm local time. After Glencore plunged 29 per cent in London on Sept 28, Noble fell 10 per cent in Asia the next day.

Noble Chief Executive Officer Yusuf Alireza said on Wednesday he should have been more forceful in pushing the trader to boost transparency as the company fended off the attacks over its accounting and battled the share-price slump. Most of Noble's rivals are private and didn't face the same scrutiny, said Alireza.

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