Noble shares dive as China Investment Corp cuts its stake
CIC sold 300m shares at S$1.32 each; not known who buyer was
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CIC sold 300m shares at S$1.32 each; not known who buyer was
Andrea Soh
01 October 2014
The stock of Noble Group dived 6.8 per cent to close at S$1.30 on Tuesday as major shareholder China Investment Corp (CIC) cut its stake in the commodities group.
The counter fell to as low as S$1.27 in early morning trading, prompting a Singapore Exchange query on the unusual price movements.
Almost 413 million shares worth S$542 million changed hands, making Noble the most heavily traded by volume.
Citing a Bloomberg report, Noble said that CIC was understood to have sold 300 million Noble shares at S$1.32 each - or a 5.4 per cent discount to Monday’s closing price of S$1.395.
The sale - believed to be through married deals - reduced CIC’s holding in Noble from 14 per cent to about 10 per cent. CIC remains Noble’s largest external shareholder. It was not known who the buyer was.
The Chinese sovereign wealth fund raised S$396 million through the sale, Wall Street Journal reported.
CIC had bought the stake in Noble in 2009 from Noble’s founder and chairman Richard Elman to increase its exposure to natural resources, at a price of S$2.1137.
After adjusting for a bonus share issue in the 2009 financial year, CIC’s buying price was S$1.368 - meaning a slight loss on its investment, said UBS analyst Louis Chua in a report.
CIC chairman Ding Xuedong had said in an opinion piece in the Financial Times in June that it was planning to invest more in agriculture and food supplies.
“We suspect the completion of the agri stake sale to Cofco might be one reason (for the cut in Noble stake),” said OCBC analyst Carey Wong. “CIC probably won’t need to own such a big stake in Noble anymore. There’s going to be some duplication...It’s not going to be an efficient use of capital.”
Noble on Tuesday announced the completion of the deal to sell a 51 per cent stake in its agricultural business to a group led by Cofco Corp, China’s largest grain trader.
The investment consortium in the group comprises Chinese private equity firm Hopu Investment, Temasek, IFC and Standard Chartered Private Equity.
The unexpected share disposal by CIC could weigh on the stock in the near term, said Maybank Kim Eng. “Depending on who the buyers of CIC’s stake are, the stock will likely continue to remain volatile in the near term.”
The overhang would persist unless CIC gave an indication on its long-term view of the company, said Mr Wong of OCBC. There was also no catalyst for the stock in the near term, he added.
Similarly, UBS’ Mr Chua said that headwinds are likely to persist at Noble’s various divisions.
“The outlook for its energy division looks challenging given the weak coal price environment, poor volume growth prospects and the structural decline in energy trading,” he said in an earlier report on Sept 23. “In the near term, we do not expect a significant uplift in return on equity for Noble.”
Noble has risen 21.5 per cent so far this year, compared with 3.4 per cent for the benchmark Straits Times Index.