23 Dec 2019
(Stocks Discussion) SGX: Noble Group Limited (SGX: CGP)?
Discuss anything about share price, dividends, yield, ratios, fundamentals, technical analysis and if you would buy or sell this stock on the SGX Singapore markets. Do take note that the answers given by our members are just your opinions, so please do your own due diligence before making an investment!
One of the best case study of corporate failure and accounting greyness in SIngapore.
The company has written off close to 2 billion in derviatives and associate companies' value in just 2 years, depsite recognising profits for them over a span of 8-10 years. One of the contentious issue was its coal derivative contracts that had priced in future coal prices at an unreasonably high future price, this in order to maitain an artifically inflated book value on the balance sheet. For years, Noble own auditor and its external Auditor, Ernest & Young, gave unqualified opinions (means approval) for these derivatives to continue the sky high valuation. This also was shown in Yancoal holdings, an associate of Noble, where Noble's stated book value was a few times higher than the market value of Yancoal in the stock market based on its stake. The whole accounting circus was eventually revealed when an ex employee left the company and whistle blew (through Iceberg Research)
It highlights the accounting issue and how weak Singapore's accounting regulatorary environment and external auditors were and are (still). Till this day, we are seeing issues of accounting in our country such as Hyflux using sky high electricity projections to maintain value of its plant and then revising it downwards by writing off close to 1 billion in one year. -
The whole saga serves an important lesson to retail investors. Do not wholly believe the accounting value of associates and property plants that are stated in the book value of companies. External auditors may have passed it but one must still ask the resonableness of the assets' values. To us, we are investing our own money; to auditors and accountants, the thing at stake is not their own money. My WARNING: They are many local companies that are listed in Singapore and Australia (ASX) that are still doing this, so be careful when investing
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