Noble Group: S&P keeps investment grade; cuts outlook
Standard & Poor’s has retained Noble Group’s investment grade rating at BBB-minus, following a review; but has cut its outlook from “stable” to “negative” on concerns of higher earnings volatility. The ratings agency notes that “the higher risk nature of Noble's trading positions could result in more volatile earnings and profitability for the company”, given that “the long-dated nature of these contracts creates a mismatch between profit recognition and cash realization”. Nevertheless, Noble said that it will be working to meet certain criteria over the next 9-12 months to address the outlook downgrade. Still, Noble highlighted that all three credit ratings agencies have now affirmed the company’s investment grade status. Earlier, chairman Richard Elman wrote in an open letter posted on the company’s website, asking stakeholders to “have a little confidence and patience in us”, and management will right the damage and will use its best efforts to recover the share value of the company. We currently have a HOLD on the stock with a fair value of S$0.61 (based on 8x FY15F EPS). (Carey Wong)