Published November 19, 2008

Portman sale nets Noble A$118m profit

By WINSTON CHAI

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COMMODITIES supply chain manager Noble Group's fourth-quarter earnings will be boosted by a A$117.7 million profit (S$116.2m million) from the sale of its stake in an Australian investment.

However, the company's stock continues to head south as the cheer from its strong quarterly results fades and concerns set in over its longer-term profitability.

Noble yesterday said in a regulatory filing that it has sold its interest in Portman Limited to Cliffs Asia-Pacific, a subsidiary of US-based Cleveland Cliffs. The initial purchase price of the Portman shares was A$26.4 million.

The gain from this sale will be recognised in the fourth quarter ending Dec 31, it said.

The company did not disclose its shareholding in Portman but said that it no longer owns any shares in the Australian firm following the divestment.

The positive news was marred by a mauling of Noble shares during yesterday's trade, with its stock dipping 9.8 per cent to $0.87 after Merrill Lynch downgraded its rating from 'buy' to 'underperform'.

Last week, Noble had announced a 145 per cent jump in Q3 profit to US$148.8 million. However, concerns over its long-term growth potential continues to dampen investor sentiment.

'We estimate that the company will see earnings growth slow by 4Q and then an earnings decline to be reported in 1Q09. Earnings recovery would be much later than that, in our view. Therefore, we expect a depressed share price for the next six months,' Merrill analyst Chong Han Lim said.

Shares of another commodities play - Olam International - also took a clobbering yesterday.

Olam's stock suffered its biggest drop in the last two weeks, dipping 13.1 per cent to close at $1.06 with analysts sticking to their negative ratings on the company.

The company had reported a 62 per cent jump in first-quarter net profit to $14.9 million last Friday.

This resulted in a short-lived rally on Monday, but brokerages such as CIMB maintained their 'underperform' rating on Olam. The credit crunch, unstable commodities markets, and weaknesses in industrial raw materials such as cotton and wool were cited as the major factors which could dent future performance.