Noble’s net income up 4% in Q3 on back of agribusiness disposal gains

It also revealed a special dividend of US$3 cents.

Noble’s stakeholders must be popping champagne after the group reported impressive results for the third quarter. Noble’s headline net income climbed 4% year-on-year to $154m in Q3, and the group also announced a special divident of US$3 cents per share.

According to Barclays, the key catalyst for Noble was the disposal of its 51% agribusiness stake. Operationally, the Energy division saw decent earnings momentum with the gas and power business seeing a large business win in North America.

“We estimate that with flat margins and operating income y/y, earnings for Noble Group could double in 2015, while the current share price would imply a valuation discount of 25% vs its historical average P/E of 11x,” stated Barclays.

Here’s more from Barclays:

Reported 3Q net debt of $5.4 billion will decline to $2 billion in 4Q, as the company received $3.4 billion from the disposal of its stake in the Agri business in October 2014.

While debt reduction will strengthen its balance sheet, the company could practically be debt free excluding the liquid inventories, which stood at $2.8 billion by the end of 3Q.

Book value by end 3Q was US$0.83, which is ahead of our estimate of US$0.82 by end 2014. P/B valuation at reported book value would be 1.1x, which could decline further to 1.0x by end 2014. 

In this context, we expect the ROEs to increase from an estimated 8% in 2014 to 13% in 2015 for which the visibility is continuing to strengthen. Valuation at or below book value has historically been a trough for Noble share prices, in our view.