One market watcher suggests buying Noble, Olam in Singapore commodities play
The recent plunge in share price of Singapore-listed commodities firm Noble Group is an opportunity for investors to buy the stock at a deep discount, one market watcher told CNBC.
"In their business, it is conceivable that there's a lot of fluctuation in their profits and in their cash flow positions and that's something investors need to account for. And in this case, it is conceivable that they would recover from the losses that they've just faced," Nirgunan Tiruchelvam, director at Religare Capital Markets, said on CNBC's "The Rundown."
Religare does not offer recommendations on stocks but Tiruchelvam added that the numbers currently suggest Noble's stock price is at a deep discount to its book value. In addition, the company had shown in the past that they have the ability to raise cash to meet their obligations.
Tiruchelvam's optimism contrasted with several analysts. Moody's on Monday downgraded ratings of Noble bonds, saying there is heightened concern over the company's liquidity and large debt maturities over the next 12 months. CreditSights was also negative, noting management's suggestion that the company may not be profitable this year.
There have been signs of bargain hunting in Noble, with shares up 3.4 percent in early Tuesday trade. The company's shares plunged 54 percent between May 9 and May 15 after it reported a surprise quarterly loss of $129.3 million for the January-March.
The Hong Kong-based company, once a blue chip stock on the Singapore Exchange (SGX), encountered a series of setbacks in the last two years. That included having its accounts questioned by anonymous researcher Iceberg Research and a downturn in the commodities sector.
Noble's market share shrunk from about $6 billion in February 2015 to $800 million, according to Reuters. It was also removed from the Straits Times Index.
Other commodity counters on the SGX fared better, with Olam and Wilmar reported improvement in net profit. Tiruchelvam said food commodities trader Olam stands to benefit from the burgeoning population and wealth in emerging markets.
"The broad theme of food consumption in emerging markets is extremely compelling. As countries become more prosperous, there is greater demand for food especially in countries like China and India," he said.