Nordic Group

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(24-12-2014, 04:59 PM)butcher Wrote: I thought Trans Cab IPO was terminated as they never accounted for the $1 million plus insurance expense for the year? Please correct me if I am wrong. Which is why their financials for the last financial year not that accurate which might also affects pro-forma depending on how they estimates. I think the auditors gave a clean report on Trans Cab last year financials when I read the prospectus. Probably, the under recognition of $1 million plus is insignificant which is why a clean report was given. However, the IPO was called off last minute. Sad

Hi butcher, see the cna news:

The issue was more on future costs, hence it would not have been covered on the latest report. The listing manager and/or underwriters are relevant parties to ensure such risks are declared, nothing that rsm in their audit capacity can comment on.

If u like a further discussion, do post on the transcab thread.. Don't want to sidetrack on Nordic thread too much.

Merry Xmas!

Sent from my iPad using Tapatalk
Hi Thor,

Thanks for your clarifications, really appreciates it. My perception is the additional insurance premium of $1.83m is based on cumulative accidents claims against the company's fleet. I thought Trans Cab should have recognised a liability for the additional insurance charges payable to insurance due to accidents which had happened. Therefore, using double entry which I learnt at secondary school for my Principles of Account:

Credit Provision/Liability (Balance Sheet)
Debit xxxxxxxxxxxxxxx ??

Please correct me if I am wrong, I think the debit should be passed as an expense to profit or loss which will have an impact which lowers profits. Please pardon my ignorance and correct me if I am wrong.

As this issue relates to financials, thus the auditors should have discovered them during their work which is my opinion but did not. Please correct me if I am wrong.
A writeup on Nordic Group by Nextinsight:

This undervalue gem has just started to attract the attention of the market despite it got neglected by the market for the past few year.

The stock price remains low as compare to their NAV but from what i realize is that the slightly higher NAV than market price is due to goodwill. I think the goodwill is quite justifiable as the acquisition of the scaffolding business generates 1/2 of 2013 earnings.

Based on the 3rd quarter report, i guess their full year net profit would most likely be 10m due to positive earning contribution by system integration segment as compared to last year. The net profit can be translate to 0.025 per share.This show a significant increase in their earning compared to prior year. Based on current share price, PE ratio is 4.64.

If the management decides to raise their dividend payout to 0.005, i think it would have substantial impact on their share price.

From what i see from their 3rd quarter report, the management are quite positive on the firm future outlook and growth opportunities.

I look forward to their full year report in Feb.
Nordic Group - Results presentation on 9 Mar 2015:
Nordic Flow Control Pte Ltd had on 12 March 2015 entered into a non-binding memorandum of understanding (the “MOU”) to acquire the entire issued and paid-up share capital of Austin Energy (Asia) Pte Ltd. SGX announcement as follows:

Key Points:
- Austin Energy is principally engaged in providing construction services, specialising in thermal insulation, fireproofing and fire protection services in the petrochemical, pharmaceutical and offshore industries.
- The purchase consideration for the Proposed Acquisition shall be S$26.0 million.
- Profit before income tax, minority interests and extraordinary items of Austin Energy for FY2014 was $9,907,000.
- Net tangible assets of the Austin Energy as at 31 December 2014 was S$12.4 million.
- The Proposed Acquisition will be financed through a combination of internally generated funds and bank borrowings.
KGI on Nordic Group: "Worth at least S$0.19, If…"

Expect much better earnings with potential acquisition and organic growth. The potential acquisition of Austin is estimated to boost net income by at least S$5m p.a. going forward. If we add this to FY14’s net income of S$7.9m, total income would be S$12.9m, or 3.2c per share which implies Nordic is currently trading at a low P/E ratio of 5 while locally listed peers are trading at 10-15x.

We think that this back of the envelope calculations underestimate the potential organic growth, given that net income has been growing at ~30% for the past 2 years and Nordic has >S$38.9m in orderbook for delivery till FY2017.

Not worried about integration risks. We will KIV if Austin will be eventually acquired, as the MOU is non-binding. Although the acquisition size is large, we are less worried about execution risks given that the management has the track record and experience in the successful integration of Multiheight Scaffolding (MHS), which was previously acquired in 2011.

The downside of the S$26m potential acquisition is further mitigated as the net tangible asset of Austin shall not be less than S$14.5m during completion of acquisition.

Well diversified revenue stream. Nordic is well diversified with three main business segments. Contributing 45% of FY14 sales, Nordic offers integrated control and management for ships with Maintenance, Repair and Overhaul (MRO). Scaffolding Services (36% of FY14 sales) provides metal scaffolding works.

Precision Engineering (18% of FY14 sales) builds and designs tooling systems, as well as provides turnkey production solutions.

Worth at least S$0.19. If Nordic acquires Austin, the company should trade minimally at S$0.19, equivalent to 6x (trough valuation multiple) of our conservative estimates of FY15 earnings.

With a 40% dividend payout ratio, investors may look forward to 8% dividend yield at today’s price. Upside abounds given that over the last 2 years, there has been consistent growth in sales, earnings and profit margins with strong cash flows while the order book has expanded.
Any ppl vested in Nordic?
Got AGM coming soon, anybody planning to attend the AGM and seek management's views on their strategy moving forward?
I will try to attend the AGM. Actually the management has been quite forthcoming in terms of their strategy, opportunities & challenges which they have posted on SGX.

Do you have any specific questions which you like to have more clarity? If I can make it I can help you ask.

(09-04-2015, 02:55 PM)butcher Wrote: Any ppl vested in Nordic?
Got AGM coming soon, anybody planning to attend the AGM and seek management's views on their strategy moving forward?


"The Board of Directors (the “Board”) of Nordic Group Limited (the “Company”, and together with its subsidiaries, the “Group”) refers to the announcement on 12 March 2015 (the “Announcement”) relating to the signing of a non-binding memorandum of understanding for the acquisition of the entire issued and paid-up share capital of Austin Energy (Asia) Pte Ltd. Unless otherwise defined herein or the context otherwise requires, all capitalised terms used herein shall bear the meanings ascribed thereto in the Announcement.

Further to the Announcement, the Company and the Purchaser have on 14 April 2015 entered into a sale and purchase agreement (the “Agreement”) with the Vendors for the Proposed Acquisition. Please refer to the Announcement for information on the AE Group and the rationale for the Proposed Acquisition."

Key Points & Comments:

1) Financial Effects (EPS) based on financial statements for FY2014:
Net profit (before proposed acquisition): $7.854mil
Net profit (after proposed acquisition): $14.135mil
EPS (b4 acq): 2 cts —> PE Ratio (based on share price $0.177): 8.85x
EPS (after acq): 3.5cts —> PE Ratio: 5.05x.

2) Post acquisition, Austin is unlikely to be able to contribute PBT of S$7.572mil annually to the Nordic Group's earnings (P.S: Nordic’s 2014 PBT was $9.157mil). But it would be conservative to estimate that Austin could add $4-5mil to Nordic’s bottom-line going forward. Integration risk are manageable because Austin is related business to the existing Multiheight scaffolding division, which incidentally, Nordic only just acquired in May 2011. The scaffolding division contributed estimated S$4.5-5mil to the group’s bottom-line in FY2014.

3) NTA (b4 acq): 10.2 cts
NTA (after acq): 7.7 cts.
** The NTA of the Group decreases due to the effects of recognising certain intangible assets and goodwill on acquisition.

4) After internalizing Austin business into the Group, will Nordic continue its prowl and become a vehicle that attracts profitable local SMEs (in related field) who want to exit their business to do so gracefully and becoming a part of rapidly growing group? Only time will tell.

*Vested & thereby could be biased, feel free to correct my mistake or to criticise.

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