NOBLE GROUP
Broker: Barclays Research
Target Price: 55 cents
Call: Neutral
Noble has announced the disposal of a 49 per cent stake in its agribusiness to Cofco for US$750 million (S$1 billion). In addition to de-gearing the balance sheet, the complete disposal will enable the group to eliminate guarantees on Noble Agri's loans, thus improving its standing with the credit rating agencies. The company stands to gain up to US$200 million from earn-out payments, if any, in future. The disposal removes a key drag on its earnings.
While the liquidity profile will likely strengthen, earnings growth and positive free cash flows are the key metrics required for the shares to re-rate from current valuations.
Noble's disposal of its stake in the fourth quarter will help the company not carry any material burden either from agri losses or potential impairments to muddle its earnings. This will bring back investors' focus on core earnings and cash flows. Delivery of positive cash flows in the next one or two quarters is a key catalyst for investors to evaluate Noble's ability to deliver on its strategy.
YANG ZI JIANG SHIP BUILDING
Broker: RHB Research
Target Price: $1.61
Call: Buy
Yangzijiang announced that it has secured a net 10 new orders worth US$626 million (S$880 million), which include four 11,800 20-ft equivalent unit containerships, the largest to be built by a private Chinese yard.
One customer made a tactical shift to cancel one bulk carrier, replacing it with three combination carriers of a slightly larger size. The customer agreed to let YZJ keep the 10 per cent deposit for the bulk carrier as compensation.
These orders take Yangzijiang's order book to a five-year high of about US$5.4 billion (S$7.6 billion).
They also push Yangzijiang's orders won above its own US$2 billion target for this year. In addition, there are 13 outstanding options worth approximately US$400 million.
The high order book could drive revenue growth, which should offset the margin decline to allow the company to deliver a stable bottomline of about three billion yuan (S$650 million) annually.
TRIYARDS HOLDINGS LTD
Broker: RHB Research
Target Price: 94 cents
Call: Buy
Triyards has won contracts worth US$45.5 million (S$64 million) in total for four vessels - a research workboat, two crewboats and a high-speed ferry - that takes orderbook on hand to US$622 million before recognitions in the first quarter of 2016.
The first and largest contract is for the Taiwan Ocean Research Institute's National Applied Research Laboratories, a Taiwanese government agency. The other orders were awarded by new clients based in the UK and New Caledonia.
These contracts, together with the four tugboats won last month and the three chemical tankers in October, have brought Triyards' orderbook to approximately US$622 million before first-quarter 2016 recognitions.
This is not only a new record in quantitative terms, but also comprises a higher mix of non-oil and gas-related vessels. The company's agility in being able to switch product offerings in response to economic conditions is a key strength that would enable it to ride out the turmoil in the oil and gas sector. The high orderbook also works to spread fixed costs over a larger revenue base, further supporting margins.
