SINGAPORE (Nov 16): Noble Group is maintaining its “hold” call on Super Group and lowering its target price to 49 cents from 57 cents as it expects it will take time for investors to restore their confidence in its business model and the valuation of its associates and offtake agreements.

In a Friday report, analyst Mervin Song believes the following initiatives may help re-rate Noble.

These include a partial or full sale of its associates and/or Level 3 assets to demonstrate the value of these assets and the presence of a strategic investor in Noble itself or one of its divisions to provide reassurance over the its business model.

“Noble stated that it could raise over US$500 million through such transactions. However, ultimately Noble has to demonstrate a sustained improvement in its free cash flow generation and earnings growth to support any re-rating,” says Song.

Given continued weakness in various commodity markets, Song believed the ability to generate earnings growth is increasing getting harder. Nevertheless, he still expects growth largely from Noble picking up market share from its smaller competitors and expansion into the energy and power markets.

“We cut our TP to S$0.49 from S$0.57 as we now assume zero value for Noble’s intangibles given continued poor operating performance,” adds the analyst.

Noble is down 4.5% to 42.5 cents.