Noble Group’s cash balance to hit $4.3b after agribusiness stake disposal: report

The deal is set to close by the end of the month.

Noble Group’s much-discussed disposal of its agribusiness stake is finally set to close by the end of September or by early October, Macquarie Research reports.

Once the disposal is done, Noble will sport a US$4.3bn cash balance and its headline gearing is set to drop to 29.5% at year end, down from 115.9% at 1H14.

“This is the key catalyst for the stock in our view. Given the potentially highly value-accretive outcomes associated with the sale, Noble remains our top pick in the sector,” notes Macquarie’s report.

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All that said, we note the analysis already elicits attractive upside across most scenarios. That would include a base case whereby we assume that no proceeds from the Agri division stake sale are reinvested, which gets us to a S$1.45 fair value.

Less attractive would be reinvestment at a value destructive ROIC. This remains an understandable concern for the market.

But we draw comfort from the fact that Noble’s reinvestment plans target areas where they have demonstrated success in the past: Energy and Metals. Where Noble’s track record has been poor is in the Agri space, where it is now reducing its exposure.