NOBLE Group halted the trading of its shares on Thursday after Iceberg Research launched its second litany of allegations against the commodity group.
In its latest report, the anonymous group, which launched its first analysis on Noble on Feb 15, 2015, alleges that Noble's profits are overstated as Noble books fair value gains on long-term offtake agreements it has with its suppliers upfront. That means expected profits for the duration of the contract which could be more than 20 years is booked on day one in the income statement.
Iceberg asserts that Noble has been doing this for contracts that have yet to start, or from mines that have yet to secure financing.
It also highlighted that the fair value of unrealised commodity contracts (mark-to-market) which are related to its long-term offtake agreements is too high and needs to be written down.
Iceberg said Noble's operating cash flows are weak and the reported operating cash flows are inflated as it excludes interest expenses and includes cash balances with futures brokers not immediately available for use in the business operations.
Iceberg said there will be a third report which will focus on Noble's debt and the investment grade.
"We will show that the way Noble reports its debt (gross, net, post inventories), and its so-called "liquidity headroom" are highly misleading. Noble does not report its entire debt. We will also write about very obvious governance issues (e.g. the board of directors), the number of key executives who left the group, and the role of the auditor. We will present our final valuation of Noble,'' the report said.