What You Need To Know About Noble Group Ltd’s Latest Profit Warning

Noble Group Ltd’s (SGX: N21) share price has taken a serious beating ever since it was accused by some market participants in 2015 of, among other issues, overstating its asset values.

Although the company has denied any wrongdoings, it has indeed been impairing some of its assets ever since.

For instance, there was an impairment made by Noble Group in its 2014 earnings. Then earlier today, the company announced a profit warning for its earnings for the fourth-quarter of 2015. The company expects to clock a loss for the fourth-quarter as well as the whole of 2015 as it is planning to impair about US$1.2 billion of its assets in the quarter.

The impairments are mainly related to its coal assets as the company has decided to use more conservative assumptions in valuing said assets; the impairment-related losses are also in addition to a loss that’s associated with the sale of Noble Agri.

While a loss of that magnitude can look scary, Noble Group noted in the announcement that the impairments are non-cash adjustments and that the company’s net asset value per share would still be above S$0.70 in the next earnings result.

Regardless of whether the accusations that have been lobbed against the company are true or not, it seems to me that Noble Group is determined to win back the trust of investors, judging from the company’s actions to revalue its assets, be more conservative, and be more transparent with the investing community about its valuation assumptions.

The process might not be pretty – given that Noble has had to issue a profit warning as mentioned – but investors seem to be rewarding a more transparent Noble Group.

The company has been one of the best-performing stocks in February thus far. Since the end of January 2016, Noble Group has seen its share price rally by 23% from S$0.31 per share to S$0.38 currently.

But despite the February rally, it has been a long ride down for long-term investors of Noble Group given that the company’s share price had peaked at over S$2.30 in 2011. But, like I said, it looks like Noble Group has been taking the right steps to gain back trust from its investors. Let’s see if the company will continue on the road to more transparency and focus on repairing its business, its reputation, and its balance sheet.

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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 writer Stanley Lim doesn’t own shares in any companies mentioned.