Battered Noble Group is 'bargain of decade' as Religare says buy

[SINGAPORE] The worst performing stock on Singapore's Straits Times Index is actually the bargain of the decade, according to Religare Capital Markets, which started coverage of commodity trader Noble Group Ltd with a buy call backed by forecasts for rising profit and sales.

"The stock is at a quarter of its average valuation in the last decade," analyst Nirgunan Tiruchelvam wrote in a report, with a target of 37 Singapore cents, compared with Thursday's close of 27 Singapore cents. The Hong Kong-based company is "the bargain of the decade," according to a headline in the note.

Noble Group shares have been bludgeoned as some investors ditched commodity-related companies amid a rout in raw materials, and the company fended off criticism of its accounting. The challenges facing chief executive officer Yusuf Alireza deepened this year as Standard & Poor's joined Moody's Investors Service in cutting the company's credit rating to junk. On Thursday, Alireza secured investor backing for the sale of Noble Group's agricultural unit, garnering at least US$750 million to improve liquidity.

"Concerns such as the credit-rating downgrade and accounting issues appear priced in," Mr Tiruchelvam said in the Jan 28 report, predicting that sales would rise to US$96.7 billion this year and US$104.7 billion in 2017. "Profit is collected at every point in the supply chain." CEO Mr Alireza said on Thursday that the company still has the support of its banks, and the sale of the agri unit would help it to improve liquidity. Noble Group also announced further bond repurchases on Thursday, paring its debt burden.

Noble Group is 33 per cent lower this year after a 65 per cent loss in 2015. That compares with the benchmark Straits Times Index's retreat of 11 per cent in 2016 and the 14 per cent drop last year.

BLOOMBERG