Noble shares extends worst rout since 1999 amid SGX warning

The move is a blow to Noble's efforts to retain its investment grade rating and slash debt by selling assets.
The move is a blow to Noble's efforts to retain its investment grade rating and slash debt by selling assets.PHOTO: REUTERS

SINGAPORE (BLOOMBERG, REUTERS) - Shares of Singapore-listed Noble Group plunged to extend its biggest monthly drop in 16 years after the Singapore bourse issued a warning on the company's shares amid a slump in commodity prices.

The commodity trader sank to 44.5 cents, down 7.5 cents or 14.4 per cent, at around 11:50am, with some 140.67 million shares having changed hands.

The stock is heading for its lowest close since November 2008.

The shares are down 40 per cent in July, and have lost nearly two-thirds of their market value since mid-February when a group calling itself Iceberg Research published criticism of the firm's accounting. Noble has rejected the criticism and hired PricewaterhouseCoopers this month to review its practices.

A 12 per cent drop on Thursday prompted the Singapore Exchange to ask if Noble knew of any reason for the move and warn investors to exercise care when trading the shares. The bourse said the stock has seen three instances of "unusual trading activities" in the past six months.

"Some people may be spooked by the 'Trade With Caution' notice," said Carey Wong, an analyst with Oversea-Chinese Banking Corp. There is also negative sentiment about commodity stocks, he said.

A representative of Noble Group said the company couldn't comment.

The Bloomberg Commodity Index lost 9.8 per cent in July, the most since September 2011, after sinking to a 13-year low.

Noble has bought back its stock at least 11 times since last month and built up a 2.8 per cent stake from zero. Two weeks before reporting earnings, companies listed in Singapore aren't allowed to repurchase their shares, according to SGX, the Business Times reported Thursday. The company is due to report its quarterly results on Aug 13, when it will also provide findings of the PwC review.

With revenues of US$86 billion last year, Singapore-listed Noble is one of Asia's largest companies to find itself in a reputational battle over accounts where consequences can be long-lasting.

Noble's bonds have also weakened and the spread on its credit default swaps has widened as markets are worried about any deterioration in the company's credit rating.

Standard & Poor's cut Noble's credit rating outlook to negative last month, citing concerns about valuations of its long-term contracts. However, the agency reaffirmed Noble's credit rating of BBB-minus, the lowest investment grade. Fitch and Moody's also have an investment grade rating on Noble.

An investment grade rating is especially key for commodity traders as they mainly rely on bank funding for their day-to-day operations.

"The challenge remains the same - it is difficult to analyse the credit risk," said one Hong Kong-based fund manager.

According to S&P's definition, a negative outlook means a rating downgrade could happen in the next six months to two years.

Noble's bonds due 2020 traded down 2-3 points at 97.25/98 on Friday. Its perpetual bonds, which investors say have the weakest structure in their category, are trading at 69/70 cents on the dollar, a deep discount to the price at which they were initially issued.