SG: MARKET PULSE: Noble Group, Hankore (1 Oct 2013)

Stock Name: Noble Grp
Company Name: NOBLE GROUP LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.76

MARKET PULSE: Noble Group, Hankore

1 Oct 2013

KEY IDEA Noble Group Ltd: X2 JV will yield long-term benefits Noble Group (Noble) has announced that it has agreed to invest in a newly established private mining venture - X2 Resources - where Noble, X2, TPG will each put in US$500m. Under the agreement, Noble will be X2 Resources' preferred marketer and provider of supply chain management (SCM) and logistics services, which is in line with its strategy to focus on its core competence as a supply chain manager. While we do see benefits from the investment, we note that most will need some time to flow through i.e. more medium to long term in nature. But for now, we believe that headwinds could continue to come from the sluggish economy in China. We further expect its Agriculture segment to remain a drag on its overall profitability. Separately, the potential shutdown in Washington could also weigh on sentiment. As such, we maintain our SELLrating and S$0.76 fair value. We would be buyers below S$0.80 (recent low was S$0.785). (Carey Wong) MORE REPORTS Hankore: Potential proxy to China's urbanization HanKore Environment Tech Group is an international group investing and operating in the water environment sector. At the invitation of the company, we visited two of its projects in Jiangsu, China. The group has invested in 11 large-scale municipal water treatment projects located in Beijing and the provinces of Jiangsu, Shandong, Shaanxi and Henan, with a total contracted capacity of 1.57m tonnes per day. Hankore will spend RMB750m to expand the capacity of five other projects, which will be largely completed in 2014, and it has secured funding (both debt and equity). By focusing on the municipal waste-water treatment segment, Hankore could be also seen as a proxy to urbanization in China, based on the careful selection of its treatment plants. We currently do not have a ratingon Hankore. (Carey Wong)

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NEWS HEADLINES - US stocks dropped on Mon, taking a little shine off the third straight quarter of gains, as investors worried about a standoff on Capitol Hill and the likely duration of a possible government shutdown. - The Ministry of Finance is raising the share buyback limit under the Companies Act for Singapore-incorporated companies from 10% to 20% with effect from today. - Growth in bank lending here continued to slow, according to numbers just released by the MAS, pointing to a generally sluggish 3Q13 for loans compared to 2Q13. - Ezion Holdings announced a restructuring and expansion plan as it tabled a bid to buy 45.15% of the enlarged share capital of Ocean Sky International. - YHM Group has secured a contract worth more than US$37m over a 20-year period to lease a set of hydroelectric power-generation equipment for power supply to a national utility board in South Asia.