We reiterate our BUY on Noble, and set an FY09F price target ofS$1.40. We see the interaction of volume growth and additional profitpoints along the supply pipeline as the main long-term value driver,with Noble’s asset-medium business model offering some shelteramid near-term volatility. We cut FY08F earnings by 6.6% (FY09F, -30.6%; FY10F, -32.4%) to capture a sharp decline in commodityprices and lower volume growth projections.

A price-volume scenario analysis highlights, in our view, attractivevalue in Noble’s current price. While we expect declines in averagerevenue per metric tonne to carry across all divisions and particularlyweak volume in the Energy, MMO and Logistics divisions, we believethe declines implied by market valuations are excessive.

Noble manages counterparty risk by being discerning, dealing onlywith tier-one companies it has a long history with. In addition, we viewNoble’s increasingly global footprint and integrated business model asa source of valuable intelligence regarding the supply-demanddynamics of commodity markets, contributing to greater flexibility andresponsiveness to market disturbances.

Some 70% of Noble’s debt has maturities exceeding 18 months, witha US$1.1bn cash position sufficient to cover all short-dated maturities.We see Noble’s liquidity position improving as falling commodityprices translate into lower WC requirements — note that almost allcredit metrics monitored have improved over 9M08. We also highlightthat Noble’s CB is trading on a yield of 15.4% to its June 2011 put.