Iceberg Research

Noble Group: a Repeat of Enron – First Report

February 15, 2015

Iceberg Research initiates coverage on Noble Group, a large commodity trader listed in Singapore, ranked number 76 in the 2014 Fortune Global 500 with revenue of $98b, market cap of $6b, and rated investment grade (BBB-/Baa3).

We show how Noble uses accounting loopholes, or aggressive accounting, in every component of its financials (income statement, balance sheet, cash flows). Noble intentionally misleads credit agencies and investors. The auditor, Ernst and Young, is well aware of the situation. The financial similarities between Noble and the defunct commodity trader Enron are striking (e.g. overvalued assets, contracts fair values, working capital management, debt presentation). The investment grade rating is definitely not justified. We estimate Noble’s equity is less than $360m (from a reported $5.6b) after the various impairments we list in this series of reports. On a price-to-book basis, the value of Noble’s shares is conservatively valued at a mere ten Singapore cents (a 92% fall from the current share price).

The three parts of our research are:

  1. Associates and Noble Agri
  2. Fair values (Continuing operations) and operating cash flows
  3. Real level of debt (gross and net), so-called “liquidity headroom”, auditor and governance

At this date, Iceberg Research does not have any long/short position in Noble’s securities (neither directly nor indirectly) and does not work in tandem with funds.

First Report: Associates and Noble Agri

Summary of findings:

    • Noble exploits the accounting treatment of its associates to avoid large impairments and fabricate profit.
    • Yancoal is the most representative example, with a gap of $600m between the carrying and market values. However, the accounting technique has been used for other companies.
    • Contrary to what Noble’s management claims, the misfortunes of these associates have a substantial cash impact on Noble.
    • The proclaimed recovery of the Agri business in 2014 was manufactured through the use of questionable methods such as subsidies from the group or depreciation cuts.
    • We believe the final price for the new associate Agri will be much lower than the provisional $1.5b payment; and/or that Noble will have substantial remaining financial commitments to its new associate. Noble may once again use the accounting for associates to hide the impairment.
    • Selling the palm oil business will be very difficult for Noble since the licence of one of its subsidiaries has been revoked by the local government.

Click here to download and print the first report: Report 1 Associates and Agri-15022015


  1. great research. would have appreciated a more objective tone though. I think the comparison with enron is not terribly accurate. I think a fairer comparison might be allied capital. still, good work

      1. forget about the comparison. its just style anyway. why not show you arrived at your price target? that might be interesting

  2. Noble’s relationship with Yancoal includes an associated marketing agreement that generates further earnings for Noble. Please be careful when equating a stock price with the full value of an investment.

    1. The marketing agreement you mention will certainly be under fair value gains on the balance sheet. Even if it were under the carrying value of Yancoal, the numbers given by Yancoal (on the other side of the trade) in its annual report are meaningless and cannot explain the gap.

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