Noble Group Ltd. – Value Analysis (SINGAPORE:CGP) : October 6, 2017

Capitalcube gives Noble Group Ltd. a score of 13.

Our analysis is based on comparing Noble Group Ltd. with the following peers – First Resources Ltd. (Singapore), Indofood Agri Resources Ltd., SP Corp. Ltd. and Olam International Limited (EB5-SG, 5JS-SG, AWE-SG and O32-SG).

Investment Outlook

Noble Group Ltd. has a fundamental score of 13 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It trades at a lower Price/Book multiple (0.23) than its peer median (0.62).
  • CGP-SG‘s EBITDA-based price implies better than peer median growth.The market seems to expect a turnaround in the company’s current EBITDA-based return on equity.
  • CGP-SG has relatively low net profit margins while its asset efficiency is relatively high.
  • Changes in annual earnings are in line with its chosen peers but lags in terms of revenue, implying the company is cost conscious and selective about spending for growth.
  • CGP-SG‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • While CGP-SG‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median Price/EBITDA ratio and may be factoring in some sort of a strategic play.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • CGP-SG seems too levered to raise additional debt.

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Leverage & Liquidity

CGP-SG would seem to have a hard time raising additional debt.

  • With debt at a relatively high 187.46% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 44.59%), and relatively tight interest coverage level of -8.64x, CGP-SG would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • Of the 4 chosen peers for the company, only 3 of the stocks have an outstanding debt balance. Companies with no debt include AWE-SG.

CGP-SG has maintained its Limited Flexibility profile from the recent year-end.

  • CGP-SG‘s interest coverage is its lowest relative to the last five years and compares to a high of 4.12x in 2014.
  • While its interest coverage decreased to -8.64x from -0.36x (in 2016), its peer median increased during this period to 3.77x from 1.32x.
  • Interest coverage fell 10.72 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • CGP-SG‘s debt-EV has declined 246.43 percentage points from last year’s high but remains above its five-year average debt-EV of -29,601.36.
  • Like the interest coverage trend, while its debt-EV also decreased (to 187.46% from 433.89%), its peer median increased during this period (to 44.59% from 43.96%).
  • Relative to peers, debt-EV fell 247.06 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
First Resources Ltd. (Singapore) 19.6 1.22 10.51 50.61
Indofood Agri Resources Ltd. 44.59 1.39 3.77 32.77
SP Corp. Ltd. 0 3.92 No interest exp 999
Olam International Limited 88.92 1.65 1.72 5.82
Noble Group Limited 187.46 1.35 -8.64 -37.24
Peer Median 44.59 1.39 3.77 32.77
Best In Class 19.6 3.92 No interest exp 999

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Company Profile

Noble Group Ltd. is an investment holding company which manages supply chain. The company’s services include logistics and transportation, price risk management and hedging, processing and blending capabilities, and structured and trade financing solutions. It operates through the following segments: Energy, Gas and Power, Mining and Metal, and Corporate. The Energy segment includes the following product divisions: Energy Coal, which trades and provides supply chain and risk management services on bituminous and sub-bituminous energy coal, and Oil Liquids, which trades and offers expertise in crude oil, distillates, gasoline, naphtha, ethanol and other refined products. The Gas and Power segment includes the following product divisions: Gas & Power, which trades and provides supply chain management services on gas, LNG, power and input coal and Energy Solutions, which offers supply and risk management services to retail customers on power and gas. The Mining and Metals segment includes the following product divisions: Metals, which trades and provide supply chain management services on aluminum, alumina and bauxite, copper, zinc, lead, nickel and raw materials, and Carbon Steel Materials, which trades and provide risk management and logistics services on iron ore, met coal, met coke and specialty ores and alloys. The Corporate segment incorporates: Logistics, which provides internal and external customers with ocean transport in the dry bulk segment, long term freight solutions and freight market guidance; Financial Services, which leverages the origination and customer solution activities of the businesses of the Group. The company was founded by Richard Samuel Elman in 1986 and is headquartered in Hong Kong.

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