Hot stock: Olam deal at premium sends Noble Group toward monthly advance

[SINGAPORE] Noble Group Ltd, the commodities trader criticised over its accounting methods, climbed for a second day, extending its first monthly advance since November, after Mitsubishi Corp agreed to pay a premium for a stake in rival Olam International Ltd.

Noble jumped 5.8 per cent to 54.5 Singapore cents as of 10:54 am in the city state, heading for a 19 per cent advance this month. The shares slumped in the past eight months amid a commodities rout and after Iceberg Research questioned the company's accounting practices in a report published in mid- February.

"There's a realisation that supply chain managers should be valued better than what they are at right now," Mixo Das, a strategist at Nomura Holdings Inc, said by phone. "Given that Mitsubishi is willing to pay so much for Olam just makes you think whether Noble is worth more as well." Mitsubishi, betting on growing demand for food in Asia, agreed to buy a 20 per cent stake in Olam International Ltd, the commodity trader controlled by Singapore's state investment company, in two deals worth S$1.53 billion. Mitsubishi is paying S$2.75 a share for new stock, representing a 44 per cent premium on Olam's last quoted price before trading was suspended on Thursday.

Even after this month's rally, Noble has fallen more than 50 per cent since Iceberg published its first report in mid- February. Short interest as a percentage of Noble's outstanding shares climbed to a record 14.5 per cent on Tuesday before slipping to 14.4 per cent on Wednesday, according to Markit Group Ltd. data tracked by Bloomberg.

Noble held a five-hour investor meeting on Aug 17 in Singapore and released a 135-page presentation about the company as part of efforts to restore investor confidence. The company also pledged to boost annual operating income from its main assets to more than US$2 billion within five years, from US$1.49 billion in 2014.

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