Noble Group

[lazyplane]

Hindsight.... If we all had hindsight, i guess most wont be doing alot of things that we are...

sigh

I was just reading, "Noble Group: What the charts don’t tell you about Noble’s total return" from http://www.investmentmoats.com/stock-mar...al-return/.

Although an old article, I liked the points the writer shared:

1.You can only gain this kind of astronomical returns if you invest in a company that generates increasing profits. The bonus shares and splits are not magic. Having more shares but when profits are falling or for the matter turned into losses would just make this a bad investment. The business, economics and operation matters if you want to hold a company this long.

2.Bonus shares and good dividends appears to be indicative of management that have confidence in their business and prefers you stick with them. In my brief exercise, not many would carry out a bonus share issue. Strangely those that issue bonus shares turn out to be rather sturdy companies that grows.

3.The price you buy matters but it is important to know the value you get. Why we kept advocating buy 50 cent 1 dollar is to buy value buys at reasonable prices. Comparing 2 commodities investment then, you may get more value simply because Noble choose to reward their share holders more.

4.I tried changing the first buy price from 22.5 cents to $3 or $6 and turns out you still make money! You only start losing money if you have bought Noble at $22 in 2001. That to me is pretty amazing.

5.Compounding and time value of money will work if you spot a company that grows its earnings and reward you.

6.Reinvest only in companies with good business, sound management that consistently shows a willingness to reward share holders. Management retires and business environment changes. Noble is in a stage right now where the chairman is struggling to find a successor. We are entering another difficult operation condition. Your dividends will ensure that you receive rewards while waiting. A change from the policy these 10 years (cutting bonus issue and dividend policy) would signal that you need to relook into it.

7.Hindsight is a bitch. This exercise just shows me I missed a great deal.

[testwrite]

not sure who is correct, iceberg or the directors, but the impairment of Yancoal does show the management is not too forthcoming, trying to base on the accounts or the management words or action may not be as reliable, lending warren buffet words "In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives."

[BlueKelah]

If yancoal does go bankrupt, there will be another 400 million to write off.

sent from my Galaxy Tab S

[specuvestor]

It doesn't take a lot to calculate the value of listed Yancoal and compare to book value. It takes a lot more to estimate the value of Yancoal to Yanzhou Coal. A large chuck of the cashflow goes to repay loan and interest, which I suspect it's an LBO of Gloucester coal gone awry

IMHO Iceberg report is simplistic to accounting technicalities compared to Anonymous report. I have no vested interest but sharing what I observe.

[greengiraffe]

Seriously how much does anyone know about a trading business?

Risk management, valuations are all theoretical...

If you ask any trader, noone can tell you with certainty how much they are going to make...

NOW - all these darlings have all seen their lovely days.

My odd lots have gone through their stock market cycle as well... i still remember how interesting Noble's annual report used to be - very good entertainment value...

[Behappyalways]

From The Economist


Noble Group

Nobbled

A big Asian commodity-trader is attacked by an anonymous online critic

Mar 14th 2015 | From the print edition

RICHARD ELMAN has lived quite a life. He began as a scrap-metal trader in London, then found himself trading commodities in Hong Kong in the 1970s. Today he is chairman of Noble Group, a global trading firm that he founded in 1987 and which deals in everything from American shale gas to Brazilian sugar. It was named after “Noble House”, a novel by James Clavell about the then-British colony that featured ruthless tycoons living by their wits.

The latest chapter in Mr Elman’s career could easily belong in a blockbuster. On February 15th an unknown outfit called Iceberg Research, with no presence other than a website and a Twitter account, began a campaign alleging that Noble’s accounts give an unduly rosy picture of its condition. Noble’s shares have tumbled by 24% so far. Iceberg says that it does not stand to profit by this decline and that it is acting for the greater good.

Noble is in some ways an unlikely target. Its annual sales are $86 billion. Its board is stuffed with the great-and-good of Hong Kong; it is audited by EY, an accounting giant; and its shares are listed in Singapore, perhaps Asia’s best-run financial centre. Yet two of Iceberg’s criticisms have bite.

The first is that Noble has overvalued in its balance-sheet an investment in an Australian coal miner. On February 26th Noble wrote down much of the value of this position, booking a non-cash charge of $200m.

The second criticism is potentially more serious: that a chunk of the profits Noble reports comes from non-cash gains created by “marking to market” long-term contracts (eg, to supply coal) and derivatives it holds. Iceberg is not accusing Noble of fraud, but it is questioning how realistic these valuations are and asking how much of the company’s reported profits are the result of this practice. Noble reported that at the end of 2014 the net fair value of these positions was $4.6 billion, equivalent to 91% of its book value.

It is hard to tell from what Noble discloses in its accounts whether its valuations are indeed fair; and since it is also unclear how much of its profits come from such changes in valuation, it is difficult to assess how robust its profits are. Noble did not respond to requests from The Economist for comment. The firm’s cashflow has been weak. Over the past three years it has booked net profits of almost $1 billion but negative cashflow of almost $2 billion, after working-capital, capital-investment and interest costs.

Noble has launched a defence of sorts. Its top brass have bought shares in the firm, presumably to signal their confidence in it. On March 5th it issued an 11-page rebuttal, suggesting that a disgruntled ex-employee was behind Iceberg. It also gave more detail about the “fair value” positions. They reflect over 12,000 individual contracts, almost half of which mature within two years. Over the past three years the firm has realised $800m of cash from such positions. Yet the rebuttal omitted a vital piece of information: how much profit has been booked from these positions. Without this nugget it is hard to form a sensible judgment about Noble’s books or health.

Even if its shares fall further, Noble can service its debts—it has $2 billion falling due in the next two years, against about $5 billion of liquidity in the form of cash and bank facilities. Standard & Poor’s, a ratings agency, has said it is comfortable with its “BBB-” rating of the firm. Yet Noble also needs to command the confidence of its trading counterparties around the world. And the price of credit-default-swaps on Noble, which insure against the risk of default, have ballooned, according to Bloomberg, an information service. That suggests the firm needs to offer a better explanation of how its accounts work—and soon.

[a74henry]

The fear of speculators out in force as the iceberg will issue another report this week. Fear is a good thing for investors if you believe this is an opportunity. Seems like a good support at $0.92. I guess we will never know until the profit or loss is realised in the future.

Things should not be that bad if Noble just bought back some of its USD bonds this week.

[greengiraffe]

Someone is desperately trying to shore up Noble based on the experience of Olam... er however there is a lack of significant strategic holder like Temasek... never say never though...

http://www.cnbc.com/id/102520991

Suitors circle Noble after commodity trader's $1.8 billion plunge
41 Mins Ago

Singapore-listed Noble Group's 30 percent share-slump over the past month has thrust it onto the radar screens of Asian companies that want a bigger clout in global commodities trading, people familiar with the matter said.

Chinese and Japanese companies have held informal talks with investment banks about potentially making approaches to Hong Kong-headquartered Noble, a Singapore-based banker aware of the matter told Reuters, even though founder and top shareholder Richard Elman has been keen on the group staying independent.

Noble's market value has shrunk by $1.8 billion since little-known Iceberg Research accused it in mid-February of inflating asset values by billions of dollars through aggressive accounting. Noble has rejected the claim and linked Iceberg to an employee it fired in 2013.

Large companies that control the supply chain in raw materials such as Noble appeal to Chinese and Japanese firms that are looking to increase their pricing power and control costs in the commodities industry.

....

[BlueKelah]

Iceberg Research 3rd report
Noble TP $0.10

Makes for a pretty interesting read!

[grubb]

Its funny that analysts say the write off of Yancoal does not matter because it is non-cash. I saw it again in today's Sunday Times. So it is okay if a company makes profits last year, reinvests that money into other assets and then write off everything this year?

Its okay because we don't restate last year's profits, and its "non-cash" "one-off" expense this year. I am not convinced.