Noble spent more on buybacks than on all but one of its investments in last four years

Noble Group's CEO Yusuf Alireza. PHOTO: BLOOMBERG

SINGAPORE (Bloomberg) - Noble Group, the Singapore-listed commodity trader that has been targeted by short-sellers and critics of its accounting, has recently spent more on its own shares than it has on all but one of its investments in four years.

Asia's largest commodity trader has bought back its own stock at least 11 times since last month and built up a 2.8 per cent stake from zero. Noble used $131 million on the purchases, which company spokesman Stephen Brown said is a good way to use excess cash. The only time Noble spent more than that on an asset since 2011 was when it paid $140 million for a Jamaican alumina plant in 2014, according to data compiled by Bloomberg.

Noble's stock has lost about half its value since mid- February, when a group calling itself Iceberg Research published criticism of the firm's accounting. The shares has slid 16 per cent as of Wednesday's close since Noble started reporting the buybacks on June 12. Noble has rejected the criticism and hired PricewaterhouseCoopers this month to review its practices.

The stock slumped as much as 9.3 per cent on Thursday before trading 7.6 per cent lower at 54.5 cents as of 11:43 a.m. in Singapore, heading for the lowest close since November 2008.

"If a company buys back shares aggressively it should be a positive for the share price," said Wei Bin, an analyst with Maybank Kim Eng in Singapore, who has the equivalent of a hold rating on the stock. "In this case, it's exactly the opposite" due to market concern that Noble's credit rating may be downgraded, he said.

Standard & Poor's changed Noble's outlook last month to negative from stable. Moody's Investors Services in May said it will maintain a stable outlook for the company.

Noble is the most shorted stock on the Strait Times Index, according to Markit Group data compiled by Bloomberg. Short interest as a percentage of outstanding shares climbed to 9.7 per cent as of July 28, Markit data show.

The company received a "positive cash inflow" of US$3.3 billion in the last quarter of 2014 from the sale of equity and repayment of a loan related to the disposal of its 51 per cent stake in Noble Agri, Mr Brown said. Noble Agri is a joint venture in agriculture between Noble and a group of investors including Cofco Corp., China's largest grain trader.

"Over the past six months the group has actively deployed this excess capital into growth businesses," as well as paying a special dividend, Mr Brown said in e-mailed comments. "Our share repurchases are being conducted cautiously and in the context of maintaining our investment grade profile."

Credit ratings are key for trading firms as they rely on borrowed money to buy goods, secure purchase contracts and hedge against price volatility.

"From a credit perspective we would be quite careful about share buybacks" as they can affect a company's liquidity, said Cindy Huang, an analyst with Standard & Poor's covering Noble Group.

So far, the amount spent by Noble is "not huge" compared to the trading company's liquidity, Ms Huang said. If the pace of buybacks accelerates "that could be something we could be concerned about," she said.