Noble Group - Nomura

1Q08: better than expectations
􀁺 Noble’s 1Q08 numbers were well above our expectations, with the
improved operating performance evident in a sequential gain in
momentum into the usually quieter first quarter. Revenue rose
132% y-y to US$9.5bn, with gross profit up 167% y-y, to
US$355mn. Net profit grew 281.3% y-y to US$167.1mn. Excluding
an exceptional gain of US$47.9mn, net profit rose by 192% y-y to
US$119mn (about 40% of our full-year forecast). We are revising
our earnings with an upward bias.
􀁺 Underpinning the results was: 1) strong volume in tonnage carried;
2) continued improvement in gross margins on the roll-out of the
group’s pipeline strategy, and; 3) effective working capital
management.
􀁺 Tonnage of commodities carried by the group increase 77.1% y-y
to 27.1mn MT. Tonnage carried for third parties (categorised under
logistics) rose 24.0% to 11.9mn MT.
􀁺 Gross margins rose to 3.74% in 1Q08 from 3.25% in 1Q07 with
gross margins in the metals & minerals division at 5.1% (vs 2.1%
in 1Q07) and agricultural division margins at 4.5% (vs 1.2%).
􀁺 Noble demonstrated effective working capital management,
evident in improvement in the cash conversion cycle to 14 days (vs
19 days in 4Q07 and 21 days in 1Q07) and lower inventory days
on hand at 18 days (vs 24 days in 4Q07 and 22 days in 1Q07).
􀁺 While we have flagged in past notes that management’s ROE
target of 20% “will be challenging as it builds out the supply
pipeline”, the group delivered (on our numbers) annualised ROE of
28.5% (vs 15.8% in 1Q07).
􀁺 Gearing (adjusted for inventory) remains low at 0.32x (vs 0.54x in
1Q07), with interest cover improving to 3.3x (vs 1.8x in 1Q07).