Noble not out of the woods yet: analyst

Earnings remain volatile until full buy-out of NAES.

While Noble has strengthened its balance sheet with the sale of Noble Americas Energy Solutions (NAES) for S$1.05bn, it will take time to restore confidence in Noble’s business model, said DBS Vickers Securities.

According to the research house, the bleak outlook is due to Noble still generating negative operating cashflows and having volatile profitability or losses, as well as various credit agencies placing Noble on a negative outlook.

It adds that Noble’s focus on its liquidity position has constrained the group's ability to take advantage of opportunities and generate profits.

"Combined with costs associated with closing capital-intensive or loss-making businesses, we expect Noble’s earnings to remain under pressure until at least the completion of the sale of NAES in December 2016," it said.

Here's more from DBS:

Heading into 4Q16, while coal prices are on an uptrend which may provide trading opportunities, we expect profitability to remain under pressure as Noble conserves its liquidity ahead of the recent of c.US$1bn from the sale of NAES.

In addition, given weak profitability this year, there is risk that Noble may report a write down of some of its assets.

Going into FY17, we expect the liquidity constraints that affected trading opportunities in 2016 to ease resulting in Noble returning to profitability. On that front, with the faster than expected turnaround of the Mining & Metals segment and potential tailwind from a recovery in the coal market, we increased our FY17F core profit by 60%, resulting in a core profit of US$148m, up from US$40m loss in FY16F.

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