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Noble shares sink deeper on more negative news

Morningstar lowers its fair value estimate on the stock from 39 cents to 25 cents due to the group's cash call

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Shares in Noble Group continued their slide on Monday following news over the weekend that another management executive is leaving the firm, just days after it announced the departure of both its chief executive and chairman.


SHARES in Noble Group continued their slide on Monday following news over the weekend that another management executive is leaving the firm, just days after it announced the departure of both its chief executive and chairman.

Noble's shares sank to as low as 22 Singapore cents - a 13-year-low - before ending the day at 23.5 cents, still down 9.6 per cent from the previous close. This comes after a turbulent week in which the stock lost 13 per cent of its value.

Noble's global head of gas and power trading Gareth Griffiths is leaving the commodities trading group, Bloomberg reported, citing unnamed sources.

The firm last week announced the resignation of its CEO Yusuf Alireza and the impending departure of its founder and executive chairman Richard Elman. It also said it was selling its US energy distribution unit Noble Americas Energy Solutions (NAES) - one of its more profitable business lines - and raising money through a US$500 million rights issue.

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The drastic overhaul of the group's top management and restructuring of Noble's business led a brokerage firm to give up coverage on the stock.

"As the company will continue to prune and restructure its business to improve its liquidity profile, we believe it may take a while for the dust to settle and, until then, we may have limited clarity," said OCBC analyst Carey Wong in a note on Monday.

Meanwhile, independent research firm Morningstar lowered its fair value estimate on the stock from 39 Singapore cents to 25 cents due to the cash call. But it also cautioned that there is "very high" uncertainty in the estimate, since there might be more asset sales in future by Noble.

Noble said last week that Mr Alireza, who is leaving for "family" reasons, will be replaced by William Randall and Jeff Frase jointly, with responsibilities split by geography and product.

Hong Kong-based Mr Randall will be responsible for Asia-Pacific business, where he will oversee hard commodities and liquefied natural gas; US-based Mr Frase will head Americas and the Middle East region where Noble's oil liquids and gas and power businesses are more active.

Mr Elman is also planning to step down in the next 12 months, the firm said last Friday.

Given his commitment to subscribe for the rights, Mr Elman is "just placing Noble into the hands of professional managers", said OCBC's Mr Wong.

"Still, the news which comes so soon after the departure of CEO Yusuf Alireza earlier last week could raise some uncertainty over the company's direction in the near term," he added.

According to Noble, Mr Elman is "not exiting the business".

In a meeting with the Securities Investors Association (Singapore) on Friday, Noble's chief financial officer Paul Jackaman said that Mr Elman is merely announcing that he will be stepping down as executive chairman.

"The process to identify a successor to assume the role of non-executive chairman has been put in place and as completion of the robust process is expected to take some time, the company has announced this in advance," he said, when asked why Mr Elman announced his future exit now.

Noble's one-for-one rights issue is estimated to raise about S$696.1 million in net proceeds. The bulk of this will go towards working capital and general corporate purposes, potentially for inventory financing, margin posting requirements and for extending trade credit to counterparties, the firm said. About one-fifth of the amount will be used to repay debt.

The cash call "should put to rest current concerns on the company's liquidity", said Morningstar. This, coupled with the NAES sale, could reduce Noble's net gearing, which would be viewed positively by ratings agencies, it added.

Noble had said last month during its results briefing that it plans to add US$1 billion in liquidity through the sale of non-core assets and re-allocating capital to better-performing businesses. It also hopes to reduce gearing level from its current 52 per cent to 45 per cent.

The financially troubled group has struggled to regain market confidence since the company's accounting practices first came under attack by Iceberg Research last year, though it has denied any wrongdoing.

Beset by persistent market doubt and a commodity rout, Noble's debt has been cut to "junk" by all three credit rating agencies.

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