Iceberg warns bargain-hunters

IN its third and final report on Noble Group, little-known company Iceberg Research warned bargain-hunters from picking up shares in the commodity trading giant. It said Noble's debt was higher than it seems, took issue with its corporate governance, and valued the company at S$0.10 a share. The low valuation is mainly due to what Iceberg alleges are US$3.8 billion worth of overstated fair value gains that result from marking commodity contracts to market prices.

Iceberg previously said the contracts did not generate enough cash. Noble, meanwhile, had countered that its fair value gains represent real value and are being realised. In the last three years, US$800 million of cash had been realised and around a third of net fair value gains and losses are expected to mature in a year, Noble said.

Iceberg, in its latest report, said: "Potential buyers may be interested in acquiring a cheap stake in Noble. As soon as they conduct detailed due diligence on the MTM (mark-to-market), they will see Noble differently." It added that it does not "see a group that could play the role that Temasek played for Olam", referring to how state investor Temasek Holdings supported commodity trader Olam International by buying its shares after short-seller Muddy Waters cast doubt on Olam's financials in late 2012. In response to Iceberg's latest report, a Noble representative said: "We are aware of the report and are reviewing it."