INVESTMENT firm Goldman Sachs has become the latest research house to turn negative on Noble Group, saying in a note on Wednesday that it was downgrading the commodities firm to neutral.
It also cut its target price from S$1.30 to S$0.77, pointing to a cautious outlook for commodity prices.
Goldman noted that Noble's credit rating was "one notch above junk status" and risks a downgrade, which could bump up its funding costs significantly.
It added that lower-than-expected commodity prices have also dragged down the stock 33 per cent from the time it issued a "buy" on May 25, 2012 - underperforming the Straits Times Index which has gone up 20 per cent within the same period.
However, Goldman said that Noble's balance sheet nonetheless "appears healthy". Even if Noble were to fully write down its associate Yancoal and some derivative assets, the company's net gearing "would only rise to 134 per cent", not far from the five-year historical average of 106 per cent, it said in its report.
The company's liquidity would also remain high since Noble has US$11 billion worth of bank facilities it has not utilised, Goldman said.
OCBC Investment Research also lowered its target price for Noble from S$1.05 to S$0.61 on June 11, maintaining its "hold" rating.
Noble shares were around S$0.705 at 3pm on Wednesday.
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