Three Things To Like About Noble Group

Ser Jing - Let's Look at Noble Group's First Quarter Results (pic)Simplicity is the key behind the strategy of Noble Group (SGX: N21). It identifies what goods and services are likely to be demanded by urbanites in high-growth markets. It then sources those goods and services from low-cost producing countries. It connects the two in a logical manner to form a global logistics supply chain.

Its products span soft commodities such as cocoa, cotton and coffee to coal in the energy sector and copper in the metals arena. It has its finger in many pies. And that is the first thing to like about Noble Group – its wide product diversification.

In the US, Noble Group has a cotton depot in South Carolina, while in South America it has a fertiliser warehouse in Brazil. In the UK it operates a gas storage facility that can supply up to 8% of the country’s daily gas demand. Meanwhile in Asia it operates a joint-venture coal mine in Xanadu and a cocoa processing plant in Sumatra. And that is the second thing to like about Noble Group – its geographic diversification.

Its wide geographic footprint allows the company to generate revenue from the four corners of the globe, though North America is by far the largest contributor. Around 60% of the company’s revenues come from the North America; about a-seventh from Europe; a-tenth from Asia and about 2% from India.

One of Noble Group’s stated strategy is to be asset light whilst remaining flexible. That is the third attraction of the company. It aims to develop a resource to the point where the capital invested can be recycled and reinvested to support growth elsewhere.

The proof is in the numbers. Noble Group has delivered some of the highest Asset Turnover figures over the years in the Singapore Market. At 4.7, its Asset Turnover is almost 10 times higher than the average for the 30 companies that make up the Straits Times Index (SGX: ^STI). It implies the company is generating $4.70 in revenue for every dollar of asset employed in the business. By comparison, Singapore’s blue chips generate around 50 cents for every dollar of asset employed.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.