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Concerns over Noble's future after shares hammered

Wednesday, May 17, 2017

SINGAPORE, Singapore (AFP) — Shares in troubled commodities trader Noble Group plunged again Monday after taking a massive hit last week, sparking concerns over the company's viability.

The firm sank 14 per cent to a 15-year low of 57 Singapore cents at one point before paring the losses, but was still down 9.8 per cent at 60 cents in Singapore afternoon trade.

The stock plunged 48 per cent last week, along with a sharp decline in the company's bonds.

“Many people have asked whether the fall is going to last, or is it still a viable entity going forward,” Nicholas Teo, a trading strategist at KGI Securities in Singapore, told Bloomberg News.

He said creditors need to assess whether the firm is “still an entity that one should be dealing with as a counterparty either for trading, for borrowing, for just doing business with”.

In the latest in a series of setbacks, Hong Kong-based Noble reported a loss of almost US$130 million in the first quarter and said it would not return to profitability until at least 2018-2019.

Its stock was hammered in 2015 by a fall in commodities prices, and it also suffered a credit rating downgrade. It had also faced allegations of irregular accounting practices.

The company has been selling assets and cutting costs to boost its finances, and S&P Global Ratings said last week that the firm's debt burden is unsustainable given its current earnings trajectory.

“Access to both short-term and long-term debt financing are key for any commodity-trading business model,” Macquarie Group analyst Conrad Werner said.

“And while Noble's liquidity headroom did tick up slightly in the first quarter, it remains low in both a historical context and relative to short-term debt, acting as a quasi-straitjacket for Noble's ability to pursue volume growth.”

Shares rallied in February after the company said it was in talks with a strategic investor, which B loomberg News said was China's Sinochem Group.

Chief Financial Officer Paul Jackaman said last week discussions with the investor were still ongoing.

Noble is also in talks with lenders over renewing a secured borrowing facility that has been extended to the end of June, Jackaman said.

Margaret Yang Yan, market analyst with CMC Markets Singapore, said last week that “technically, Noble's share price looks like a falling knife''.