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Will Noble Group do an OSIM or Swiber?

Will Noble Group do an OSIM or Swiber Holdings? The embattled commodity trader is currently at a cross-road as many investors wonder if it can pull off a dramatic recovery.

Once a blue chip stalwart in Singapore stock exchange, the Hong Kong based company is now trading at penny stock price level. The free fall of Noble Group share price wiped off billion of dollars from its market capitalization value and it would have being included in SGX’s watchlist had the Minimum Trading Price rule not being revised recently.

Crisis for Noble Group?

One of the worst fears among investors must be Noble Group becoming the next Swiber, which collapsed and went under judicial management in 2016. The fall of Swiber was due to the prolonged slump in oil prices causing oil and gas companies to cancel infrastructure projects. Another factor that led to Swiber’s shocking downfall was the amount of debts it took on. It was reported that it owed money to 10 banks and DBS alone had about $700 million worth of loan exposure to Swiber.

Those who invested in Swiber shares or its junk bonds are unlikely to get back their hard-earned money.

Similar to Swiber, Noble Group endured a challenging 2016 due to the collapse of commodity prices and the slowdown in China’s economy. It also has multi-billion dollars worth of debts. Nonetheless, the similarities stop there and frankly speaking, barring unforeseen circumstances, it is unlikely that Noble Group would suffer the same fate as Swiber.

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In 2016, the company has taken steps to raise funds through a $500 million rights issue and also pared down debts through asset sales. The business is also diversified enough to withstand the ongoing slump in commodity prices, with support from its growing Metals and Mining Segment. It also has several institutional investors among its major shareholders, such as sovereign wealth fund, China Investment Corporation.

Big Boys Movements

When investing in stocks, always remember to watch out for the Big Boys movements because they can affect your investments. Interestingly, a reader has highlighted that China Investment Corporation (CIC), through Best Investment Corporation, has been reducing its stake in Noble Group from 2010 to 2014. The biggest reduction in the shareholding occurred in 2014, from 14.08% to 9.36%.

2010: 14.72%

2011: 14.61%

2012: 14.31%

2013: 14.08%

2014: 9.36%

2015: 9.65%

When it comes to investing in stocks, it is important to note the big boys movement because they can influence the shares’ movement. You certainly want to avoid clashing with them unless you have ultra deep pockets. The decreasing stake of CIC in Noble Group over recent years is a worrying sign and only insiders would know the real cause for the paring down of stakes. Thus, investors must be cautious and not catch a falling knife. The current cheap price may not mean that Noble Group is under-valued.

Turnaround for Noble Group?

On the other hand, many investors must be fervently hoping that Noble Group will do an OSIM, Singapore’s best known massage chair maker. In 2009, OSIM’s founder, Ron Sim made the difficult decision of writing off OSIM investment in US retailer, Brookstone, after it registered a loss of almost $100 million the previous year. Many investors lost faith in the management’s abilities and during the Great Financial Crisis, many dumped the stock, sending it crashing to $0.05 per share.

Amazingly, Ron Sim managed to complete a remarkable turnaround and stunned the market by recording 21 consecutive quarters of profit growth. On looking back, it was never easy for OSIM as the boss put up a tough fight. Ron Sim is known to be a resilient entrepreneur and the turnaround vindicated that management plays a key role in steering a ship safely through the fiercest storm.

Investors who believed in Ron Sim when the share price was $0.05 in 2009 would have been handsomely rewarded when OSIM was privatized for $1.41 in 2016. In fact, if you have purchased one million shares when it was trading at $0.05, you would have become a millionaire by now. Considering the capital outlay of only $50,000, OSIM is certainly one of the fairytale multi-bagger SGX stocks!

Can Noble Group be your ticket to financial freedom?

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Many investors have criticized and scoffed at my entry point for this stock in other stock forums. They made sarcastic remarks that my  wealth strategy is totally flawed. At the end of the day, it does not matter I am right or wrong. What matters more if there is any Big Boys movements that can affect  your investments.

Thus, investors should learn how to spot Big Boys movements so as to avoid losses in stock investments.

The jury is still out on whether Noble Group can achieve a turnaround. But if you have some spare cash which you can afford to lose, Noble Group can be an interesting stock to trade and make money. Two key factors are expected to determine the destiny of the beleaguered company – its cost reduction exercise and management strategies. The results will be out in first half of 2017. By then, expect Noble Group to rise from the ashes or self-implode in style. Are you ready for the ride?

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SG Wealth Builder

Updated: January 15, 2017 — 6:13 am

10 Comments

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  1. Don’t own any noble yet but could be worth a look and a punt..Thanks for the idea!

  2. Noble is not a producer, they are a trader. It’s not because commodities prices were low that they recorded losses. It does not matter for a trader if prices are high or low.
    The reason is because their accounting was and still is extremely dodgy.

    Look at their balance sheet. Are they selling their contracts now amid tight liquidity? No they don’t because they cannot. So they are selling everything else. But there is not much to sell anymore.

    Once again, retail investors will be taken advantage of.

  3. Glencore has bounced back nicely, Noble will likely be a longer term play but management has kept its promises over the last yr and diligently rebuilt its balance sheet. Still a work in progress, though Q3 should see things really turn. Commodities look strong which helps. All traders and producers got hurt to various degrees in the downturn, though in this case definitely a good opportunity to make some money. Not without its risks, though the upside is huge. My tip is .32 by year end with a 2 yr upside above .60. Let’s see, do your own diligence and good luck. Shortist time is nearly over for Noble, only a few months for them left to play.

  4. Hi there,

    Need to be careful to state that their accounting is dodgy.
    After all, Noble has their accounts audited by qualified auditors.

    Regards,
    Gerald
    http://www.sgwealthbuilder.com

  5. You mean like Enron or every accounting scandal in Singapore? It’s always audited by definition if it is listed. If Noble valued their assets honestly, do you think the share price would have collapsed this way when all their competitors (Vitol, Trafigura, and now Glencore) are doing absolutely fine? How can somebody seriously explain Noble’s crisis when everybody else in the trading business is fine.

  6. Hi Ofcercan,

    Noble engaged a second auditor, PwC, to audit their accounts.
    I am not a professional accountant nor am I vested in Noble. So I am not trying to defend Noble but just putting things into perspective.
    Sometimes the collapse of share price of a company may not be due to the business fundamentals. Short sellers trying to make money may be behind the attacks. Just my view.

    Regards,
    Gerald
    http://www.sgwealthbuilder.com

  7. Hi Gerald,

    – PwC had a very long disclaimer clearly stating that they were not responsible for the valuation, just formal compliance to commodity contracts accounting rules, that everybody knows are extremely loose. If you want more details, see Financial Times article on it.
    – we have heard the “it’s a shortist conspiracy” for the past two years. Don’t you think after a while, the argument just does not stand?
    – fundamentals are terrible: they have accumulated accounting losses AND huge operating cash outflows.
    – CEO, CFO and many heads of businesses left the boat suddenly. why would you do that if you have confidence in your business?

  8. The creditor will always want to continue to support to avoid lost if it is not the worst case scenario. As it is still have ongoing supporting for business going concern. It is also consider a strategic asset for a country for other macro strategic reason, especially it is commodity. Some intrinsic value which may not be tangibly measure in figures.

  9. Hi Wenny,

    I would disagree with you because Noble Group is not too big to fail. Being a commodity trader based in Hong Kong, its collapse would not trigger any major waves in Singapore. So I would rate the potential collapse of Noble Group at 50-50. Will it rise from the ash? I don’t know but this counter is certainly good for trading due to the volatility. I wouldn’t hold for long term play because of its swing nature.

    Regards,
    Gerald
    http://www.sgwealthbuilder.com

  10. Thanks for you financial view on this company. I would think that besides financial reason there is others value in its as it is importantly view as a key strategic intangible value for a country thru SWF

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