Why Did Shares of Noble Group Limited Jump 7.7% This Morning?

After months and months of bad news for investors of Noble Group Limited (SGX: N21), it seems that there is finally some good news from the company. And, that news has likely caused the share price of the firm to jump by 7.7% today (as of time of writing at 1:50 pm ).

Yesterday night, Noble Group announced that it is “in advanced discussions with potential purchasers on both this sale and other strategic transactions, but no definitive or legally binding documents have yet been signed.” The “sale” Noble Group was referring to involves its 49% stake in agriculture outfit Noble Agri.

According to a report from the Business Times this morning, media reports had recently surfaced that Noble Group is in talks to offload its Noble Agri stake to Chinese grain trader, Cofco.

Noble Group has been under pressure lately due to warnings from credit rating agencies in late November that they might be downgrading the company’s credit rating from investment-grade to “junk” status.

But, the company has revealed that it has plans to raise more than US$500 million in capital through asset disposals. According to the aforementioned Business Times report, Noble’s stake in Noble Agri may be sold to Cofco for between US$700 million and US$750 million.

If the sale is successful, it would raise more capital than what Noble’s plans had called for. But, the rumoured sale price is still a huge discount from the US$1.5 billion that Cofco had paid for a 51% stake in Noble Agri back in 2014. This is a possible indication of how desperate Noble Group might be to raise capital.

Noble Group has already recorded net income of about US$194 million for the first three quarters of 2015. If there are no major impairment charges or write downs for Noble Group in the fourth quarter this year, the company might be looking at a nice recovery in its earnings, after a big impairment charge in 2014 had pressured earnings for that year.

And now with a possible sale of its stake in Noble Agri in the works, Noble Group would have the ability to pare down its debt. All these are positive developments for Noble Group. So, is this the beginning of the turnaround of Noble Group? Time will tell – we’ll keep you updated on the developments.

Meanwhile, if you'd like more insights on investing and important updates about the stock market, sign up for The Motley Fool Singapore's free weekly investing newsletter, Take Stock Singapore. Written by David Kuo, it can help you grow your wealth in the years ahead.

Like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any companies mentioned above.