Noble Group

As mentioned previously; as of 31st March 2016, Noble's current assets consist of fair value derivatives which has maturity of beyond 4 years (1,339mil) and before 4 years (1,839 mil). We can safely concur Noble holds such derivatives until they mature. Interestingly, all of Noble's 6 bil of debts mature by 2020. It is worth noting then Noble had maturing debts of 2.5 bil in 2016 and 0.7 bil in 2017. Based on other components of the balance sheet, Noble is likely to experience a cash flow problem.

Fast forward to this week's announcement, Noble has declared that it has refinanced/paid all its debts due in 2016. In addition, from its recent presentation, debts due in 2017 has risen from 0.7 bil (as of 31 march) to 2.0 bil (as of 3 June). Noble intends to repay these 2 bil debts in 2017 through the sale of Noble America and proceeds of the 500 mil rights.

From these facts, it shows Noble has ensured its survival until 2017 by negotiating with banks to roll over debts for 1 more year. Given that Noble still has 2.8 bil more debts to clear by 2020 and that it has 1.8 bil of derivatives cash flow+1.3 bil in cash, it seems Noble may be able to survive if it is able to raise approx 1 to 1.5 bil for its impending sale.

<Interested in Noble if the price is right>

When confident, Long term strategic. Leverage up.

When balls shrinks, better play safe to ensure survival. Raise more equity

Nothing new under the sun. Same story will repeat for REITs in a downturn.

(04-06-2016, 11:54 AM)CY09 Wrote: As mentioned previously; as of 31st March 2016,  Noble's current assets consist of fair value derivatives which has maturity of beyond 4 years (1,339mil) and before 4 years (1,839 mil). We can safely concur Noble holds such derivatives until they mature. Interestingly, all of Noble's 6 bil of debts mature by 2020. It is worth noting then Noble had maturing debts of 2.5 bil in 2016 and 0.7 bil in 2017. Based on other components of the balance sheet, Noble is likely to experience a cash flow problem.

Fast forward to this week's announcement, Noble has declared that it has refinanced/paid all its debts due in 2016. In addition, from its recent presentation, debts due in 2017 has risen from 0.7 bil (as of 31 march) to 2.0 bil (as of 3 June). Noble intends to repay these 2 bil debts in 2017 through the sale of Noble America and proceeds of the 500 mil rights.

From these facts, it shows Noble has ensured its survival until 2017 by negotiating with banks to roll over debts for 1 more year. Given that Noble still has 2.8 bil more debts to clear by 2020 and that it has 1.8 bil of derivatives cash flow+1.3 bil in cash, it seems Noble may be able to survive if it is able to raise approx 1 to 1.5 bil for its impending sale.

<Interested in Noble if the price is right>

The stock, is becoming more interesting as a special situation bet.

First, I need a reasonably certainty on solvency. IMO, the vision still not reasonably clear yet. Bondholders' confidence seems a good gauge on Mr. Market's view on the topic.

Next, I need to do an reasonable estimation on earning, based on the new normal, after a poorer credit rating, and restructured asset/biz model

Last, I need to ensure a high MOS on pricing.

What is the right pricing? The theoretical ex-right pricing, is a good staring point, IMO

What is your view?

(not vested, probably not yet)

My two concerns on Noble

Firstly, how much will Noble Americas fetch. If the sale is able to raise at least 1.3 bil, Noble will definitely stay afloat until end 2017.
Secondly, is the fluctuations of its fair value derivatives. Should Noble record another 10-20% loss in these contracts over the next 4 years, the solvency in 2020 will then become another issue.

Earnings wise is a black box because it is probably in 2018 will we see the leaner Noble's earnings after the sales and higher interest.

In that sense, it is harder to value. To me, I will look at Noble at around 12-14 cents per share ( it will be a significant discount for me to its reported book value)

Rather sure most of their assets were overvalued,how much provisions to be made are anyone's guess .

(07-06-2016, 11:02 AM)CY09 Wrote: My two concerns on Noble

Firstly, how much will Noble Americas fetch. If the sale is able to raise at least 1.3 bil, Noble will definitely stay afloat until end 2017.
Secondly, is the fluctuations of its fair value derivatives. Should Noble record another 10-20% loss in these contracts over the next 4 years, the solvency in 2020 will then become another issue.

Earnings wise is a black box because it is probably in 2018 will we see the leaner Noble's earnings after the sales and higher interest.

In that sense, it is harder to value. To me, I will look at Noble at around 12-14 cents per share ( it will be a significant discount for me to its reported book value)

IMO, it is a speculative bet, or gambling bluntly, unless you have reasonable vision on solvency and earning. 

(07-06-2016, 03:26 PM)CityFarmer Wrote:

(07-06-2016, 11:02 AM)CY09 Wrote: My two concerns on Noble

Firstly, how much will Noble Americas fetch. If the sale is able to raise at least 1.3 bil, Noble will definitely stay afloat until end 2017.
Secondly, is the fluctuations of its fair value derivatives. Should Noble record another 10-20% loss in these contracts over the next 4 years, the solvency in 2020 will then become another issue.

Earnings wise is a black box because it is probably in 2018 will we see the leaner Noble's earnings after the sales and higher interest.

In that sense, it is harder to value. To me, I will look at Noble at around 12-14 cents per share ( it will be a significant discount for me to its reported book value)

IMO, it is a speculative bet, or gambling bluntly, unless you have reasonable vision on solvency and earning. 

I don't think it's reported book value is reliable.
Their prior acquisitions are all not marked to market, even when there is a clear and obvious way to do so.
Generally if management doesnt mark to market when it is so easy to do so, I can only presume ill intention.
And if so, what can we base our calculations on?
Mere speculation.

(07-06-2016, 06:07 PM)TTTI Wrote: I don't think it's reported book value is reliable.
Their prior acquisitions are all not marked to market, even when there is a clear and obvious way to do so.
Generally if management doesnt mark to market when it is so easy to do so, I can only presume ill intention.
And if so, what can we base our calculations on?
Mere speculation.

The disputes were mainly on fixed asset valuation. The PPE/Investment had been adjusted significantly after the disputes. The non-current asset is ~40% of the pre-crisis level.

I reckon, it is reasonable, to assume the reliability of the reports, after close to 2 years of intensive external sensitization.  

After the recent re-financing, if it works, the gearing level will be improved significantly to a more comfortable level. Once the plan materialized, I reckon, the solvency issue will be solved.

Let's sit tight and observe the execution of the re-financing plan.  

(not vested, but observing)

The important recapitalization milestones are

24 Jun 2016 - the EGM on right issue
2H 2016 - the disposal of NAES, which is advised by Morgan Stanley and HSBC now

http://infopub.sgx.com/FileOpen/NAES%20A...eID=408610

The ideal capital structure, in brief, are
- Debt is about US$ 5 billion, and reduced by US$ 2 billion to about US$ 3-4 billion
- Debt is used mainly to support working capital needs, which is average about US$ 3-4 billion in previous years.
- Fixed Asset acquisitions are supported by internal resources, e.g. cash and operating cash flow. With its asset-light model, I reckon it should be sufficient
- Liquid asset (receivables and cash) is able to meet current liabilities (payable + debt) needs, thus liquidity risk is greatly reduced.

Is the ideal capital structure too far a dream, after the planned recap exercises? Any comments?

(not vested, and actively monitoring)1

The darkest hour before the dawn?  

Noble credit rating cut by S&P despite efforts to raise cash

(June 16): Noble Group’s credit rating was cut by S&P Global Ratings for the second time in six months, citing its weakened liquidity position and higher funding costs despite recent efforts to raise cash.

The rating was lowered to B+ from BB-, with a negative outlook, according to a statement on Wednesday. The downgrade comes after a turbulent few weeks for the company.
...
http://www2.theedgemarkets.com/sg/articl...raise-cash