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Why Did Noble Group Limited Fall 7% This Morning?

The shares of Noble Group Limited (SGX: N21) fell a shocking 7% this morning. This came after one of Noble Group’s largest investors, sovereign-wealth fund China Investment Corp (CIC) announced plans to sell a third of its 15% stake in the company.

CIC is expected to cash out about S$405 million from the sale, which it targets at S$1.32 to S$1.35 per share, a price tag that is about 3% to 5% discount from the closing price of S$1.395 on Monday. That roughly amounts to a 4.5% stake in Noble Group Limited. CIC currently owns about 15% of the commodity trader. The news came even after Noble Group just closed the deal with Cofco Corp to form an agri-business joint venture in China, a venture which counts Temasek Holdings as one of the co-investors in the project.

Investors are not taking the news positively. Many see the investment by CIC into Noble Group Limited as a relationship that might help Noble Group in expanding its business in China. With this sale, investors are worried that the partnership might not be as strong going forward.

A key question is whether this is a simple realignment of investment by CIC or the beginning of a complete divestment of its stake in Noble Group?

For now though, the Chinese sovereign-wealth fund has not indicated its longer term objective in selling a portion of its stake in the company. However, a look at the company’s performance over the recent years shows that although Noble Group has been successfully in boosting its revenue base in the last few years, its profit remains lackluster.

Foolish Summary

With the company operating margins declining for the past few years, there is worry that the company might have difficulties remaining profitable. Noble Group needs to prove to the market that it is able to improve its operating margins and profit in the future.

Noble Group Limited currently trades at 15.9 times price to earnings ratio and providing investors with a dividend yield of 0.88%. Learn more about Noble Group and other companies through a free subscription to Take Stock SingaporeSign up here to The Motley Fool’s weekly investing newsletter that will teach you how to grow your wealth in the years ahead.

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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 contributor Stanley Lim does not own any company mentioned above