Noble Group

[specuvestor]

I dont think these contracts are meant to be unwound. They are meant to be held to maturity

I would be very skeptical of Noble if not for the fact that 1) PWC did an audit on their derivatives holding 2) they have been paying down their bonds on maturity

Thats not to say they are squeaky clean as their history shows that they are very opportunistic and trading oriented. But at least i think their book value is reasonably real.

Investors worried about short term debt cost or liquidity should avoid this counter as their business is mainly based on working capital and every year around this time they will surely need to sign some kind of revolver agreement. It's the nature of their business.

Hi Specuvestor,

I agree that the contracts were not meant to be unwound. I just posted that in response to discussions on whether the current price book ratio makes it a bargain. I am aware that current accounting standards permit or even encourage fixed price commodity supply contracts to be disclosed as derivatives and held at fair value, but i personally think it is ripe for abuse. Furthermore, according to the Annual Report, Noble has other commodity supply contracts which are held by its' processing arm and treated as executory contracts and not disclosed on the FS.

I view these contracts like the intangible assets of a business, like current telco subscriber contracts or current enrolled students in education providers. However, those assets are rarely shown on the balance sheets of such companies and will only get recognised on balance sheets when companies acquire them through M&A (through purchase price allocations).

Hi Clement

Indeed I think bio asset reval is also ripe for abuse but we can only play within the regulatory playground and strip out the dangerous games and hope not to be bitten

As per posted I think one valid point about Iceberg is the buying and selling of subsidiaries within relatively short amount of time. I think this is a valid concern which I think had probably reduced in past 18 months. The contracts on the books seemed to be shrinking as well off the top of my head, which should be expected if sales value dropping ie WC need is lessened.