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Why Have Noble Group Limited’s Shares Fallen By 62% In A Year

The last 12 months haven’t been kind to Singapore’s stock market given that the Straits Times Index (SGX: ^STI) has slipped by 14%.

But if you thought that was bad, then you have to meet commodities trader Noble Group Limited (SGX: N21).

Based on its closing price of $0.265 yesterday, Noble’s shares have fallen by 62% compared to a year ago.

Let’s look at a few possible reasons for the company’s fall from grace:

1. Saying goodbye to the Straits Times Index

Noble had been considered a blue chip stock in Singapore’s market for a number of years by virtue of it being one of the 30 constituents of the Straits Times Index.

But, CapitaLand Commercial Trust (SGX: C61U) ended up replacing Noble in the Straits Times Index in March this year.  Losing its blue chip status may have hurt Noble’s share price.

2. Poor business performance over the past few years

If one would look back at history, Noble’s share price had actually started a big decline starting from 2010. Back then, its shares were exchanging hands at S$2.10 each. By the start of 2013, its shares were worth just S$1.155. In fact, my colleague Chong Ser Jing had pointed out in a previous article that despite Noble Group’s high levels of debt, its profit had still plunged from 2010 to 2014.

In the first-quarter of 2016, the company continued putting in poor numbers. Its quarterly revenue was down by 32% year-on-year to US$11.4 billion and its profit attributable to shareholders had plunged by 62% to US$40.5 million.

3. Rights issue and shake-up of the management team

Just last week on 3 June, in a bid to shore up its balance sheet, Noble had proposed a US$500 million rights issue on the basis of one rights share for every existing share. The rights shares are offered at S$0.11 each, which represents a 63% discount to Noble’s share price of S$0.30 just prior to the announcement of the rights issue.

On the same day, it was also announced that Noble’s executive chairman and founder, Richard Elman, would be stepping down from his post “within the next 12 months.” This came only a few days after Noble’s chief executive, Yusuf Alireza, had resigned.

Executive churn can often cause unease amongst investors. And as we’ve seen, two of Noble’s leaders have just announced their intention to leave in quick succession.

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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 James Yeo doesn’t own shares in any companies mentioned.