WE SEE Noble as most leveraged to an improvement in China's economic
activity in 2013, especially industrial output. Excluding its oil &
gas business, China is its single biggest market, which we estimate
accounts for more than 30 per cent of total group tonnage. Its
importance as a commodity supplier was also likely a key consideration
when China Investment Corp took up a substantial stake in 2009.
While on-ground assets in China are quite light (limited to oilseed
crushing and storage), Noble is one of the largest suppliers of hard
commodities such as coal and iron ore into China, sourced from other
countries. Improved demand in 2013 could mark a significant turnaround
in profitability.
Noble has a business and asset footprint across the world, and is
involved from energy to soft commodities. We believe this should allow
them better opportunities to deploy capital profitably. Its earnings
over the past 12 months have also been generated through lower values at
risk (VARs) (0.52 per cent in Q3 2012), which may imply upside if 2013
turns out to be a conducive year for commodities demand.
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