HONG KONG (Reuters Breakingviews) - Chinese oil and gas conglomerate Sinochem is looking to buy into Singapore-listed Noble Group, Reuters has reported. Joining a capital hike last summer would have been a cheaper way into the energy trader. But with much of Noble’s restructuring done and commodities prices rising there could still be upside for Sinochem, provided it moves fast.
A stake in Noble would in theory help Sinochem become a global energy player. But it is not for the faint-hearted. Noble shares have been on a roller-coaster since anonymous blogger Iceberg Research questioned the company’s accounting practices in early 2015. The attack, coupled with a crippling downturn in commodities prices, forced the company to sell some of its family silver and cut costs to regain investor confidence.
Two years and several asset sales later, Noble appears to have fixed its shaky finances. The sale of a North American asset in October, and a rights issue helped the trading house complete an earlier commitment to raise $2 billion. The company aims to get net debt below 40 percent of its total capital, defined as net debt plus shareholder equity, by the end of 2016. Noble has shed a chief executive, and founder Richard Elman has promised to step down from his role of executive chairman by mid-year. The duo had been blamed for weakening Noble in the run up to its full-blown crisis.
True, the real time to invest was around when Noble raised $500 million of new equity in summer, after which shares traded for as little as half their current price. But despite having shaken off its refinancing challenges, Noble’s shares are still 75 percent below where they were in early 2015. As commodity prices start to nose upwards, a pounce on Noble seems timely.
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