Commodities giant Noble Group has made progress on bolstering its balance sheet but some shareholders are still not buying the turnaround story if yesterday's annual general meeting (AGM) is anything to go by.
About 390 investors turned up for the AGM at Suntec Convention Centre and all 15 resolutions, including the re-election of chairman Richard Elman as director, received a majority backing but there was also plenty of dissent expressed.
Chief executive Yusuf Alireza told the meeting that Noble had delivered on all its key priorities for the second half of 2015. It generated a positive cash flow of around US$651 million (S$887 million) in the period, reducing debt by around US$362 million and raising US$750 million in capital from the sale of Noble Agri.
But several shareholders still stepped forward to voice tough questions, including long-time investor Mano Sabnani, who felt the firm's business margin was too thin to be sustainable.
He asked: "How are you going to maintain margins going forward? Your operating income margin was around 1.76 per cent but your average cost of debt was 3.8 per cent. Can you assure us that your business model is still sustainable?"
Mr Alireza replied that more of Noble's future funding will rely on the cheaper secured financing. Margins will also gradually improve as smaller players are forced out of the market due to a lack of capital.
Meanwhile, Noble will have around US$4.6 billion in potential liquidity to service the US$3.2 billion debt due by the end of next year, he added.
Accountant Fred Tan, 66, then challenged the management to provide more details on the basis of a US$6.2 billion fair value gain booked last year.
"We need to know the basis of your valuation, and whether there's the possibility of a significant impairment," he asked.
Questions surrounding Noble's fair value model have hounded the firm since last year, due in part to persistent allegations by Iceberg Research that Noble had used aggressive fair-value estimates on the balance sheet to hide debt and liquidity issues.
Chief financial officer Paul Jackaman said yesterday there has been sufficient scrutiny and information on Noble's mark-to-market assets.
Mr Tan was not impressed, telling The Straits Times that Noble's management and board had not done enough to inform small shareholders on its complex businesses. "There are a lot of things they are trying to evade, and they don't even pay dividend any more. I plan to sell my shares," he said.
But there were others who had differing views. An investor who wished to be known as John, 27, said: "I found this AGM better handled than last year's, with more information to help me learn about the company's business."
The AGM concluded a very tumultuous year for Noble. Its share price plummeted around 60 per cent in 2015 amid the commodity crash and the Iceberg allegations, while the company also lost its investment-grade rating with Standard & Poor's and Moody's.
Mr Alireza told the AGM that the investment grades are a "straitjacket" that he inherited but would rather not have, as the firm can now tap the cheaper secured financing, which is typically offered only to non-investment grade firms.
Noble shares closed down 0.5 cents, or 1.14 per cent, at 43.5 cents yesterday after the AGM.