Here’s how embattled Noble Group can win back its investors’ trust

It might need to sell some shady associates.

Commodity trader Noble Group has been unable to recover after an extremely damaging short-seller report caused its share price to cash early this year. The group remains one of the most actively traded STI constituent stock on the SGX, and it has lost over 60% of its value since the beginning of the year.

In order to woo investors into placing their bets on the company again, analysts at DBS suggest some initiatives that could help restore Noble’s reputation in the market.

For instance, Noble could do a partial or full sale of its associates and/or Level 3 assets to demonstrate the value of its assets, which should alleviate investors’ worries. Alternatively, Noble needs the entrance of a strategic investor either in the company or one of its divisions in order to provide reassurance over the its business model.

“To that end, Noble stated that it could raise over US$500m through such transactions. However, ultimately Noble has to demonstrate a sustained improvement in its free cash flow generation and earnings growth to support any re-rating,” DBS said.

“We believe it will take time for Noble to restore confidence in its business model and the valuation of its associates and Level 3 assets (offtake agreements). This is especially in light of another underwhelming set of results. 3Q15 core profit after perpetual dividends fell 40% y-o-y,” DBS added.