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The Three Numbers That Dignify Noble Group

Listed in Singapore and headquartered in Hong Kong, Noble Group (SGX: N21) connects low-cost commodity producers with high-demand growth markets. In other words, it is a supply chain manager.

The products that Noble Group handles include energy resources such as coal, oil and gas and minerals such as copper, tin, zinc and lead. Together, they help the company deliver a reasonable, though not remarkable, Return on Equity of 7.2%.

Noble Group’s Net Income Margin cannot be described as generous. If anything, it is abysmally low, as high operating expenses eat into horribly-low gross margins. Over the last five years, gross margins have come in between 2% and 4%.

Meanwhile, Net Income Margin has ranged between 0.5% and 0.25%. The margin for the last 12 months was 0.36%, which means that it generated $0.36 on every $100 of sales.

The company makes up for its low bottom-line margin with an above-average Asset Turnover. Its Asset Turnover of 4.5 is almost ten times higher than the median for the 30 companies that make up the Straits Times Index (SGX: ^STI). It implies that Noble generates $4.50 of sales on every dollar of asset employed in the business, which is outstanding.

Noble Group borrows heavily – total debt of S$5.9b is almost on a par with total shareholder equity of S$5.4b. The upshot is a Leverage Ratio of 4.4, which is almost two-and-a-half higher than the average for Singapore’s blue chips.

By separating out Noble Group’s Return on Equity, it is possible to see how the company links its chain. Its RoE of 7.2% is the product of a wafer-thin margin of 0.36%; a chunky Asset Turnover of 4.5 and a heavy lump of Leverage Ratio of 4.4.

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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.