Username
Password
Forget Password?
  1. Indices
  2. Commodities
  3. Currencies
Straits Times 3,114.16 -11.98 -0.38%
Hang Seng 26,719.58 -128.91 -0.48%
Dow Jones 26,770.20 -255.68 -0.95%
Shanghai Composite 2,938.14 -39.19 -1.32%
2 Reasons Why Nordic Group’s Orderbook Will Continue To Grow
Corporate Digest | 19 September 2014
Related stocks:
MR7
5PF
By: Choo Hao Xiang
Articles (151) Profile

Having seen the transformation that Nordic Group underwent since 2011, which ensured that the firm remained in the black, we went on to discuss on the outlook of Nordic’s business. Here are our findings.

Brighter Years Ahead
Chang expects the uptrends to continue. There are two main reasons behind his optimism.

Firstly, Nordic’s scaffolding unit will be involved in major maintenance projects for its clients who are going to shut down their plants in FY15. Occurring once every two years, this will add-on to the good earnings visibility already provided by scheduled maintenance works. Moreover, Chang added that Nordic is in the running for Chevron’s expansion project which will kick in, in 2015.

The second factor is the expectation of a shipping upcycle going forward. As the global economy continues to strengthen, world trade will follow suit. According to World Trade Organization economists, world trade is expected to grow 4.7 percent in 2014 and 5.3 percent in 2015. Considering that about 90 percent of world trade is carried by the international shipping industry, this bodes well for the shipping industry. Total seaborne trade is expected to grow by an average 6 percent year-on-year towards 2016.

Another encouraging development comes from the world’s biggest seaborne importer China, where Nordic has a strong foothold. The State Council of China recently issued a shipping guidance which is aimed at providing support for the country’s shipping industry, including the optimisation of fleet structure and cooperation along the industry value chain. This will benefit the industry in the long term.

Zooming in on Nordic, the firm is also seeing demand momentum pick up. “Using the orderbook as a measurement, we have $34.8 million worth of contracts as of 30 June 2014. That has already surpassed the previous year-end figure,” Chang said.

Demand Momentum

Source: Company Reports

That said, any meaningful recovery in the shipping industry would probably only materialise over the long term as the industry shakes off the oversupply situation that has been around for some five years.

Valuations
As at time of writing, Nordic is trading at a 9 percent discount to book value and at 6.8 times historical earnings. This compares favourably against its peers – BH Global is trading at 26.2 times historical earnings while Jason Marine is trading at 8.4 times.

What’s more, Nordic dishes out dividends annually that yields an average of more than 2 percent to reward shareholders.

Valuations aside, what investors need to be aware of is that the risk profile of Nordic has changed since listing. Considering that it is drawing stability from its scaffolding unit and seeing pockets of growth in its marine business as well as helmed by an effective management team, Nordic just might be a hidden gem that has slipped under investors’ radar.

Haoxiang manages and oversees the portfolio of stocks in the consumer goods and hospitality sectors at Shares Investment.

Please click here for more information about this author.

Nordic Group  0.270 -- --   
Business: Co is an automation integration solutions provider for marine, oil & gas control systems, with a sales & support network that spans Asia & Europe. [FY18 Turnover] Project services (54.6%), maintenance services (41.2%), others (4.2%).

Insight: May-19, 1Q19 revenue slid 14.1% due to decreased r... Read More
Jason Marine Group  -- -- --   
Business: Marine electronics systems integrator & support services provider. [FY19 Turnover] Sales of goods (71.9%), rendering of svcs (21.2%), airtime revenue (6.9%).

Insight: May-19, FY19 revenue slid 8.4% with decreased reve... Read More


Join The Conversation
The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

All Rights Reserved. Pioneers & Leaders (Publishers) Pte Ltd. Best viewed with Mozilla Firefox 3.5 and above.