Today’s Focus

• Sakari Resources - Share price decline more than priced in impact of coal price weakness on earnings. Maintain BUY for potential rebound in coal price.

This message was edited by stand up n wake up on 29-Jun-2012 @ 11:26 AM

Price/Tgt: S$1.10/S$1.46   Mkt Cap: US$5,517m   Daily Val: US$51m    1-Yr Hi/Lo: S$2.02/S$1.05

Weak Commodity Prices Could Hit 2Q12 Net Profit, Offset By Gloucester Gain

Earnings Preview

• Earnings to rise on one-off gain, but core earnings could be hit by weak commodity prices. We expect earnings to rise 72% on a one-off gain from the merger of subsidiary Gloucester Coal with Yancoal Australia. We have estimated a US$160m gain on supply chain assets for 2Q12. Net profit adjusted for one-offs and coupons due to perpetual securities is expected to decline 44% yoy and 45% qoq. The decline is mainly due to: a) the slump in prices for most commodities that Noble is trading, and b) higher finance costs (+30% yoy) due to long-term debt and lower interest capitalised.
• Agriculture could be weak on lower commodity prices and seasonality. We expect operating profit from the agriculture segment to decline 42% yoy on weaker prices of sugar, coffee, cocoa, and cotton. Mitigating factor for the segment could come from a recovery in soybean crush margins achieved in early-2Q12 as well as the start of the Brazil sugar harvest.
• Energy to remain core driver of profits. Declining oil prices is likely to be indicative of a difficult trading environment in 2Q12. Still, we expect a 25% yoy growth in the segment as Noble’s gas and power business ramps up and carbon credit losses reversed from a year ago.
• MMO to remain weak on declining aluminium and iron ore prices. We expect the segment to post a 35% yoy decline in operating profit due to unfavourable movements in aluminium and iron ore prices, which declined 12% and 7% respectively during the quarter.

Our View

• Maintain BUY but lower our target price. We lower our 2012 and 2013 net profit forecasts by 13% and 12% respectively, mainly due to lower commodity price assumptions. Our 2012 net profit estimate is now in line with consensus while 2013 estimate is 9% below consensus. Our target price is also lowered to S$1.46, based on a dividend discount model (required rate: 10%, terminal growth 1.8%).

BRO  biosensors i  got alot  already ...can in.....  if got profit hv to run ....will updated u tq