Noble Group

[greentea]

MPA says it found no malpractices, in response to the 3rd Iceberg report's claims of whistleblowing to MPA: http://btd.sg/19UbOxw

[piggo]

Muddy Waters is short Noble Group Limited ("Noble"). Noble seems to exist solely to borrow and burn cash. According to Bloomberg, Noble has been free cash flow positive only four out of 20 years -- in other words, it literally generates positive free cash flow once every five years! According to Bloomberg, since 1997 Noble has raised from banks and markets net $7.7 billion. Noble's debt is now almost four billion dollars. (A recent estimate, which Noble has not contested, is that due to repo-style transactions, Noble's intra-quarter debt is approximately $3 billion greater than reported.)

We are really short Noble's management. With a company as complex and opaque as Noble, there is no way for investors to definitively answer certain key questions. It becomes a question of how much investors should trust Noble's management to be straight with them. Noble's management has adamantly insisted that its accounting is conservative, and by implication, is reflective of reality. We do not believe Noble's management.

Muddy Waters is Short Noble

Interesting saga developing.

[butcher]

Wow, is Noble really in crisis? How much will it drop to?

[greentea]

Noble rejects allegations of course... http://businesstimes.com.sg/companies-ma...xtor=AL-18

[ngcheeki]

Will there be another law suit against muddy water?


SINGAPORE (April 9): Just when the market has started to look past Iceberg Research's allegations that Noble Group ( Financial Dashboard) employs questionable accounting practices, shares of the commodities trader are under attack again - this time by short-seller Muddy Waters.

Carson Block, Muddy Waters' head of research and the man who sent shares of Olam International on a tailspin in 2012 by saying the company was at risk of becoming insolvent, issued a 14-page report today saying Noble "seems to exist solely to borrow and burn cash".

"We are puzzled by why, when given a 20-year runway, this company is still unable to stop burning cash," said Block.

"Really, what is the point of Noble growing, if after all of this time, it still cannot consistently generate cash? We think Noble’s growth is a means to no end, other than to keep the credit flowing."

Yet, for a company so "complex and opaque", there is "no way" for investors to know the true state of its financial health, he said.

The report dwelt at length on PT Alhasanie (PT ALH), an Indonesian firm the company acquired in 3Q2011, when Noble incurred its first quarterly loss - US$17.9 million ($24.3 million) - as a listed entity.

Noble booked a US$46.4-million gain from negative goodwill when it bought PT ALH, enabling it to reduce its quarterly loss by two-thirds, Block noted.

"The most remarkable aspect of the US$46.4 million negative goodwill gain Noble booked on PT ALH was that Noble paid only US$300,000 for the company.

"In other words, Noble claimed to have bought a company worth US$46.7 million for only US$300,000 – i.e., Noble found someone willing to sell this gem for 0.6% of its true value."

Noble sold PT ALH a year later for US$4 million.

"Noble justified receiving consideration significantly less than PT ALH’s carrying value by disclosing that prior to the sale, PT ALH restructured an off-take agreement with one of Noble’s subsidiaries," Block said.

"We speculate that the real purpose of the restructured off-take agreement was to avoid Noble taking a massive impairment charge when it disposed of PT ALH."

One of Noble's affiliate, PT Atlas Resources, ended up buying PT ALH a few months later, purportedly at US$4 million, and booked a fair-value gain of US$6.1 million on the acquisition.

"We are unsure what benefit Noble would have received by abetting what seems to be questionable accounting treatment by PT Atlas; but little about this series of transactions seems above board."

The transactions surrounding PT ALH show that Noble "manipulates financials and investors when the pressure is on," said Block.

"The problem for investors is that given how prodigiously Noble chews up cash, the pressure is always on."

The report sent Noble's shares down as much as 9.3% to 82.5 cents, their lowest since September 2013, prompting queries from the Singapore Exchange.

In response, the company said it was studying the report and "completely rejects the allegations".

http://www.theedgemarkets.com/sg/article...llegations

[testwrite]

"muddy water" in chinese means taking advantage in chaos. anyway I think that is what shorts are trying to do, i cursory read the report, I do not think it is very substantial, the sum involved in those company PT ALH , etc, isnt too much. and the speech analysis, there are a lot of assumption and speculation that the CFO is trying to hide something. Whether the company is fraud or not, the more deadly effect of these attacks, are the loans, once their supplier and banks, are worried, their credit will try up, even if it is well run, honest company can goes bankrupt.

but I think the company isn't that straight with the accounts, and if I am an investor , I will stay away from the company. as for shorting, I think unless you have a good cheap brokerage account like muddy water, using local broker is too expensive, and you might not be fast enough

[yeokiwi]

I do not think it is very substantial, the sum involved in those company PT ALH , etc, isnt too much.

Well, the trick here is not to attack in general but to be more specific in attack even thought the amount is little. If MW can prove that PT ALH deal is shady, it will bring doubts to the rest.
In this case, it is very difficult for Noble not to respond to this accusation since they cannot beat around the rest of the bush.

[specuvestor]

Agree with Yeokiwi. It doesn't matter if you have been truthful most of your life. You just need to be caught lying once in public. That's unfortunately how public perception works.

IMHO MW is a grade B one hit wonder. But their point on PT ALH is interesting... if true it seems to be just a regular SPV being setup (not as strange as MW implying) but for what purpose? For tax and why difference in valuations? Someone has to pay the $12m.

Realising fair value gain is not new from negative goodwill purchases. For example Benq GOT PAID to take over Siemens Mobile.

[egghead]

Noble's response this morning

[piggo]

Noble's response this morning

Long winded form of writing that serves to tire out readers with little information. Considering it's the work of 3 PR agencies, it's not very impressive... maybe it reflects the internal chaos going about Noble at this point in time Think something fishy must be going on...