Chain Reaction Research: Noble Group: Cost of Capital and Deforestation Risks under priced?
- Forecast of 2016 revenue is $46 billion, 30% below 2015, due to poor semiannual
performance and asset sell down strategy which may shave 4.5% off
expected 2016 operating earnings, 18% annualized.
- Impairments of palm oil assets and coal receivables may reduce balance sheet
equity value by $400 million, or 12%. 33% of Noble’s palm oil landbank is
undevelopable as it is primary forest and possibly peat. Coal assets are said to
be overvalued by 30%.
- Syndicate banks have been involved in the recent rights issue and are also
involved in the divestment of North America Energy Solutions (NAES),
suggesting a conflict of interest coupled with possible mispricing of debt and
future increase in borrowing costs.
- Net profit outlook for 2016 and beyond is below consensus due to divestments and expectations for higher interest rate. Risks for shareholders remain.