Iceberg unleashes second report on Noble, takes aim at “suspicious” cash flows

Its fair values are fabricated, says the report.

Iceberg Research has unveiled its second report on Noble barely a day before the Singapore-listed commodity giant is due to release its quarterly results.

This time, the anonymous research group took aim at Noble’s “suspicious” cash flows. Iceberg claimed that there is a wide divergence between Noble’s net profit and operating cash flows, brought about by “fabricated” fair values.

Iceberg alleged that Noble’s operating cash flow is propped up by fair values of unrealised commodities contracts. Iceberg’s data claimed that these contracts surged from near zero in 2009 to an unprecedented net $3.8b, made up of $5.8b assets and $2b liabilities.

“The level of Noble’s fair values has become incredible. They now dwarf all of their competitors (e.g. Glencore). They are 3.5 times the level of Enron’s contracts at its peak, eleven months prior to filing for bankruptcy. Similar to Enron, Noble recognises the entire profit for long maturity contracts the same day these contracts are signed,” the report noted.

Iceberg’s first report, released a few days before markets closed for the Lunar New Year, charged that Noble was cooking its books by exploiting the accounting treatment of its associates to avoid large impairments and fabricate profit.

The first report caused Noble’s share price to crash to record lows in just two days. Noble responded by claiming that Iceberg’s anonymity dents its credibility.

Iceberg’s report did not name any authors, while its website did not carry an address or formal contact details.
Noble asserted that it reports its results in accordance with International Financial Reporting Standards, and that the annual financial statements for 2013 and prior years have been audited by Ernst & Young who issued unqualified opinions.

In response, Iceberg reiterated that it does not hold any position, long or short, whether directly or indirectly, in Noble’s securities.

“We did not approach the group to address our concerns because we did not want to alert insiders. We also note that Noble has not answered seven of the eight questions asked at the end of our first report,” Iceberg stated.

Noble issued a trading halt at 8:52 this morning, pending the release of an announcement.