Gloucester; an accretive and energy division catalyst — We think Gloucester will be accretive by c9% for 2010 earnings, based on consensus earnings. The deal will help catalyze value in the coal business. Management forecasts that it will own 20Mtpa of production in three years.
Oil and Gas ambitions in the eyes of management — Expansion and earnings growth remain a focus. Management believes that increasing exposure to oil & gas is paramount. We see two routes; organic resource development (high risk, high reward) or mature asset with life extensions acquisitions as proven in coal.
Revising earnings by -24% and -20% for ‘09E and ‘10E — A reflection of the outlook post the downturn in commodities. This is misleading as we expect a recovery in earnings through 2H09 with a supportive price environment and better medium term outlook following our recent commodity upgrades.
Reiterate our Buy; increasing our target price to S$2.2/s — Near-term trading could be volatile but as a play on China growth with a commodity bent, we think Noble is a name to be accumulating.
Risks near-term around the US$ — The key risk for the trading business is the US$ and if the re-stocking demand is not matched by real demand.
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