It’s the Muddy Waters saga all over again for beleaguered Noble Group

Will a white knight come to Noble’s rescue?

A scathing and well-timed report from a new research house tripped commodity trading giant Noble Group yesterday.

Noble’s share price tumbled 7.9% to a three-year low yesterday after Iceberg Research accused the group of intentionally misleading credit agencies and investors by using “accounting loopholes” to “avoid large impairments and fabricate profit”.

Analysts note that the report was reminiscent of the Muddy Waters' piece on Olam in 2012, and also Glaucus Research Group’s report on China Minzhong in 2013. All three independent research houses had accused their respective ‘subjects’ of ‘accounting gaffes’.

Nicholas Teo of CMC Markets notes that white knights eventually rescued these companies from the onslaught of selling that persisted days after the reports. Temasek took over Olam, while Indofood Agri took Minzhong private.

“Short sellers may similarly be wary this time round when trading Noble Group. Interestingly, Best Investment Corporation holds roughly 10% of Noble Group. Best Investment Corporation is a government-owned investment firm from China. While Noble Group has issued a standard but strong retort to the Iceberg report yesterday, even threatening to take action on the research house, this offered little respite to the falling share price. Noble continues to be sold down this morning,” he noted.

Iceberg’s motivation for this damaging report also remains under question, especially considering they have opted to hide behind their cloak of anonymity. Iceberg’s website features only one report and does not carry analyst names, addresses, or contact numbers.

Carey Wong of OCBC Research cautions that the near-term uncertainty is likely to linger, if the previous Olam-Muddy Waters episode is anything to go by.

“While Noble may need to be more proactive in meeting with investors to categorically counter the allegations, we note that the company may be in a "blackout" period as it is due to report its FY14 financial results on 26 Feb, thus making IR's adverse report on Noble well timed,” she wrote.