Noble, now at S$0.40, is STI’s worst performer for 2015

SINGAPORE — Commodities trader Noble Group remains the worst performer this year among the 30 stocks that make up the benchmark Straits Times Index (STI), after losing nearly 65 per cent of its share price since the start of the year due to the slump in global commodity prices and questions over its accounting methods.

The stock kicked off the year at S$1.14, after having hit a peak of S$1.25 last year, but last changed hands yesterday at S$0.40. As credit rating agencies put Noble on review for downgrades to junk status with the commodity giant struggling with leverage and liquidity, the outlook remains soft amid trying global economic conditions, and any recovery will depend on its ability to further raise capital and a rebound in prices of commodities.

“Commodity stock prices aren’t recovering,” said Mr Daniel Ang, analyst at Phillip Futures. “This is due to the weak global growth, mainly stemming from China. This is likely to drag on to the end-of-year and the start of next year.”

A week ago, Moody’s Investors Service placed Noble’s credit ratings under review for a downgrade, citing its weaker-than-expected liquidity profile as well as high leverage. On Tuesday, the group received another warning from Standard & Poor’s, which placed Noble’s BBB-rating, the lowest investment-grade debt score, on review with negative implications.

“Noble’s liquidity and financial leverage have weakened and breached levels that we consider appropriate for the current rating,” S&P said.

In response to the ratings reviews, a Noble spokesperson said the company is committed to raising capital through various funding options, including asset disposals and partnerships with strategic investors, to strengthen its balance sheet and enhance liquidity.

“We are confident that these transactions will result in us retaining our investment grade rating,” he said.

A best-case scenario would see Noble stock on a limited recovery path, according to IG market analyst Bernard Aw, who said the global economic environment remains “uninspiring” and would not provide much of a boost. However, he noted that the stock’s current price of S$0.40 is a key support level.

“Consider the fact that Noble has been in a difficult situation for a while now, which already is reflected in the share price,” Mr Aw said. “Noble has fallen around 65 per cent since the start of the year, and reached a 12-year lows of S$0.38. I see the S$0.40 mark acting like a rallying point, as Noble has tested it three times this year. Much of the negativity has already been priced in ... This means we could see some bounce in coming sessions.”

The company’s shares have suffered since mid-February, when its accounting methods came under attack by a group named Iceberg Research. United States-based short seller Muddy Waters joined in the attack in April, questioning Noble’s cash flow and management practices.

In August, PricewaterhouseCoopers issued a report saying it found no wrongdoing in a review of Noble’s accounting practices, but the company’s weak financial performance continued to weigh on the share price. ANGELA TENG