Noble's net earnings crashed 50% to US$75m

Will it recover anytime soon?

According to Nomura, Noble reported weaker (10% miss) than its estimates (adj net earnings of US$75mn, 50% decline y-y); but Street’s expectations could have been much higher (1H forms 27% of Street’s FY estimates.

Here's more:

Agri was the spoilsport (second consecutive quarter of losses) and energy margins, strong at 9.6$/MT, declined sequentially. MMO margins improved but at the cost of volumes. Volumes continued to be strong in Agri and Energy.

Book value provides the floor, but range-bound on lack of catalysts

Valuations wise, Noble is closer to the floor, in our view (13x CY13 P/E, 9x CY14 P/E, 0.95x asset replacement value, 0.9x book value and most importantly, at 1x tangible book value).

However, with sugar prices lower than running costs, 2013 may not see much improvement.

We expect 2014 to be much better with sugar running at full utilization, Argentina crush picking up and MMO stabilizing. We expect the stock to stay rangebound (catalyst could be sugar price up move, as and when it happens) but retain our BUY rating, to factor in big move up in earnings next year.

Our TP has reduced from SGD1.32 to SGD1.15 mainly due to estimate revisions on the back of lower-than-expected 1HFY13 earnings. Cost reduction, new capacities and expansion on track Noble said that planned reduction in SG&A is on track (still 49% of op income, Nomura's long-term target 46%). Ramping up utilizations in sugar (next year) and new oilseed/biodiesel capacities (Ukraine, Brazil and S Africa) are on course of completion this year.

Plus, Noble has secured significant offtakes in alumina (in Jamaica) and coal in S Africa, which should continue to help energy/MMO volumes.

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