Commentary: Iceberg’s Criticism does not take note of improvements by Noble

Date: August 10, 2017

To the Editor

Business Times
First published on Business Times on 10 August 2017

Dear Editor,

I refer to the Business Times’ articles published on 4 and 5 August 2017 on Iceberg’s latest report on Noble Group Limited.

SIAS has been following the developments at Noble. We are pleased that Noble has shown willingness to engage with retail investors, including issuing results guidance and holding shareholder engagements. We have also observed greater transparency in Noble’s financial statements in recent quarters including information on fair value gains and associated companies. Noble’s financial statements for 2015 and 2016 also received clean audit opinions from one of the international big four accounting firms, Ernst & Young in Hong Kong, which is expected to have robust internal processes to ensure quality auditing.

A noteworthy improvement in Noble’s financial reporting is its early adoption of the important “Key Audit Matters” (KAM) discussion. Starting with the annual report for the year ended 31 December 2015, Noble included KAM disclosures a year earlier than the effective date for the standard. More crucial is that the KAMs in Noble’s annual reports discussed matters Iceberg said were of most concern. These included accounting policies for mark-to-market and fair value of long-term commodity contracts, impairment assessments for assets including Yancoal, and treatment of working capital finance programs like inventory sales. The KAMs also said the accounting policies were reviewed for compliance with the International Financial Reporting Standards.

It is, therefore, disconcerting to see the company continuing to be subjected to repeated criticisms on these same issues. It is also interesting to note that all but one of Iceberg’s website reports are centred on Noble. There is also no visibility of person or persons responsible for the report. Investors must be more discerning and careful in considering the origin and the credibility of the authors of the report. SIAS will continue to engage Noble and watch the developments.

SIAS has always welcomed constructive input from whistle-blowers, analysts and from other parties. But we would advise shareholders and the public to treat with caution any report from an unregulated research company of unknown origin and motive. Such companies have absolutely no accountability and do not have the interest of retail investors at heart. Some of them are serving their own interests, especially by shorting the stock first and thereafter publishing negative reports. Instead, our investors should consider the reports of our regulated analysts to make their informed investment decisions.

Since the inception of the caveat emptor market, SIAS and MoneySense has aggressively embarked on investor education, as there is risks in all investments. Investors are taught how to diversify their investments and not to put all their eggs in one basket. We know that regulators can only intervene in certain circumstances, especially when there is proof of wrongdoing. SIAS has always acted to protect investors by invoking the arm of the law, where necessary. Where there is interference with investments, SIAS has and will intervene to seek justice. However, there can be no insurance against market or business failures.

The regulators, in our view, are acting within the boundaries of their relevant laws.

If Iceberg feels that it has credible and relevant information for scrutiny, we invite Iceberg to meet with us as this will be in the interest of Noble’s shareholders.

David Gerald
Founder, President & CEO
Securities Investors Association (Singapore)