Noble Group placement downsized to $126 million

Hong Kong commodities trading company Noble Group yesterday announced that it had raised S$183.9 million ($126 million) in a placement on Monday night. Although the deal shows that investors have regained some appetite for exposure to the commodities sector, the offering had to be downsized from its original top target size of $250 million.

The final size comprised 121 million shares, of which 84.7 million were new. The remaining 36.3 million were secondary shares sold by major shareholder Noble Temple Trading Inc (NTTI), which is owned by Noble Holdings. The shares represent 2.62% of the company.

The shares were offered with a price range of S$1.52 to S$1.58 and priced at S$1.52, representing a discount of 2.5% to the weighted average price on Monday, the day of the trade, and up until the placement agreement was signed yesterday.

At the outset, the Singapore-listed company expected to raise between $200 million and $250 million. Markets were strong early on Monday, but went soft as the day progressed and, by the time the deal was launched, it also had to compete with numerous placements in the US.

The result, according to one source, was that orders were coming in, but were not of the size that had been initially anticipated. The deal subsequently halved in size.

A large part of the book consisted of Asian investors, complemented by orders from both the US and Europe. A significant number of investors were pre-existing shareholders taking advantage of the opportunity to increase their stake.

The company netted approximately $86 million from the sale, which it intends to use for general corporate purposes.

Last week, Noble Group reported better-than-expected first-quarter earnings. Net profits for the first three months were $90.2 million, 46% down year-on-year, which is not surprising considering that the commodities bubble has burst in the intervening period. But what is heartening is that overall sales volumes were up 26% year-on-year. There was growth in all divisions except for agriculture, which remained flat.

Royal Bank of Scotland has Noble Group down as a "buy". "We see Noble as an excellent play on the recovery in international trade that we expect in the second half of 2009," says RBS in a report released last week, adding: "It looks reasonably valued and conservatively managed."

The day the results came out, the share price went up 10% -- gains which were wiped out by a couple of days of poor trading and a 9% drop yesterday morning before the shares were suspended.

Cazenove and J.P. Morgan managed the sale.