Nordic Group

[Polaris]

Hi valuebuddies,

Starting a new thread here on Nordic Group. The company was listed in 2010 at S$0.20 per share. It has 4 business units: System integration, MRO & Trading, Precision Engineering and Scaffolding Services.

Its 9M2014 Revenue was S$51mil vs $46mil in 9M2013 (22% increase). PAT was S$5.3mil vs 3.3mil in 9M2013 (60% increase). Gearing wise, it has a Net Cash position of $3.5mil.

Its 9M14 order book is currently S$40.7mil. This compares with $30mil in FY13, $19mil in FY12, 39.7mil in FY11, 32.5mil in FY10.

Dividends in FY13 & FY12 was 0.25 cts per ordinary shares. At its recently traded price of $0.10, that gives a dividend yield of about 2.5%. Management has given guidance that: "Higher dividends payout expected given the improved profitability and cash flows for FY14."

The following presentation was posted after the announcement of 3Q14 results. It provides a very good overview and is very much worth a read.

http://infopub.sgx.com/FileOpen/NordicRe...eID=326284

Any buddies who have any insights into their business feel free to comment. Thanks!

[merxantia]

This counter has certainly seen a turnaround in net profit recently with good growth in areas of MRO, system integration and trading, and has even secured a USD2m contract from a repeat customer.

However, it seems to have suffered from the oil and gas overhang for now and will probably be drifting around (I suspect) until the FY results are out to provide any sort of direction. Hoping for a modest dividend payout then.

Vested.

[Polaris]

Interview: Dorcas Teo, CEO, Nordic Flow Control, Singapore

- 9 June 2014, source: energyboardroom.com

The CEO of Nordic Flow Control describes the Singaporean-based company’s rise from a mere service agent to an SGX-listed and fully integrated automation solutions provider with a focus on the marine and offshore oil and gas industries. Having identified certain market gaps for integrated solutions, the CEO goes on to explain the strategies designed to enhance the company’s product portfolio while maintaining its growth momentum in Singapore and abroad.

Q: Nordic Flow Control started as a service agent and has evolved into one of Singapore’s leading Small- medium enterprises (SMEs). What have been Nordic Flow’s core corporate milestones?

A: Established in 1998, we have leapt from a mere service agent, to a fully integrated automation solutions provider. In 1998, we were a tiny company consisting of five people and two desks. Over time, we have established a manufacturing capability and a large-scale marketing team. In 2010, the progress of the company reached a new peak when it listed on the SGX. Through unwavering energy, commitment and determination, we have secured our place as one of Singapore’s premier automation service companies and taken the Nordic Flow flag to a number of national markets. Today, our main competitors are Emerson Process Management and to compete with such an entity, we have to keep evolving and adapting.

Q: What are the key factors in driving the ascent of Nordic Flow Control?

A: One word: people. The greatest motivation and driver that we have is our people. From the very inception of the company, our people have wanted to make Nordic Flow a Singaporean success story. They have shown unflinching faith in our products and brand.

Nordic Flow believes in mentorship programmes and we have a number in place. For instance, we have a buddy system to foster togetherness and unity. We have a horizontal structure based on shared learning and understanding. We want our employees – both in terms of character and skill – to grow into the company and better themselves. Investing in our people is absolutely paramount to our success.

Q: Elaborating on the structure & subsidiaries of Nordic Flow, can you give us an insight into the ranging services the company offers stakeholders in the marine and offshore oil and gas industry?

A: Nordic Flow Group oversees and owns the varying subsidiaries and services that we provide. We primarily serve the marine and offshore oil and gas industries, targeting a dual platform: the ship-owners and shipyards. Since our founding, we have established a strong reputation in providing consistent and reliable solutions to more than 1,000 vessels for more than 100 customers in our Systems Integration and MRO and Trading divisions, as well as a stable customer base of more than ten in our Precision Engineering division. Nordic’s Systems Integration and Precision Engineering operations are based in Singapore and China, with our head office and warehouse located in Singapore and two production facilities located in Suzhou, China.

We have developed greater traction in China than in other markets. Ultimately, it is a country that we could not ignore. Indeed, today we have a strong local presence in China with two production facilities located in Suzhou. The fact we are a Singaporean company and have a superb track record with the domestic yards, allowed us to leverage the stamp of quality that is associated with Singapore and take that into China.


Q: In 2011, Nordic Flow Group acquired Multiheight Group to diversify into Scaffolding Services business. How has this investment return panned out and what synergies have you been able to leverage from this acquisition?

A: Traditionally, we have always pursued marine and offshore plays. However, through our subsidiary, Multiheight Group, we provide a full suite of safety-certified metal scaffolding systems, including design, erection, modification, dismantling, sales and rental, servicing the onshore oil and gas and petrochemical industries. Located in Singapore, Multiheight is the resident contractor for major local and multinational companies in the onshore oil and gas industry. They have successfully penetrated into a market that is associated with very high barriers: the petrochemical arena in Jurong Island. As such, the competition is less in this area and we are well poised to exploit that facet and add on further Nordic Flow products.

This acquisition has diversified our business scope and opened ourselves up to a thriving niche in the energy market. Moreover, since entering China, 70 percent of our business has stemmed from China and we became susceptible to foreign exchange volatility. Working with Multiheight, a very successful and well organized Singaporean company, has helped us to re-balance our country focus towards Singapore and mitigate our foreign exchange exposure.

Q: The offshore automation market is a very crowded sector. What competitive edge does Nordic Flow have over international competitors?

A: We differentiate ourselves from our large competitors because we are smaller and more nimble. Such traits allow us to be more focused: a vital characteristic in this market. The multinationals may have an edge in the area of huge budgets for new technology. Nevertheless, our designs are incredibly innovative and compact. In one product, we offer one holistic solution for one price. This strategy manifests a great competitive advantage over our rivals.

Nordic Flow is also fortunate to have the backing of the Singapore government and this principally comes through SPRING. SPRING Singapore is an agency under the Ministry of Trade and Industry responsible for helping Singapore enterprises grow and establish trust in Singapore products and services. As the enterprise development agency, SPRING works with partners to help enterprises in financing, skill development and management, technology and innovation, and access to markets. They have given Nordic Flow a huge amount of support on certain projects and supplemented the development of some of our cutting edge technology, such as our Remote Access System. The support given by SPRING is a further example of the conducive business environment that Singapore has carefully cultivated.

Q: What is the next phase of growth for the company?

A: We are looking to develop more products for our customer base and build on the solid platform that we have constructed. The marine market is a very fragmented one and there is a demand from the shipyards for the integrated solutions we provide. We are looking to enhance our integrated platform through inorganic growth: acquiring or partnering with exceptional local companies.
Numerous Singaporean SME companies have excellent local products but have struggled to project their services to a wider, international audience. The big need to help the small. Nordic Flow’s management approach and broad resource base can facilitate the overseas expansion of Singaporean oil and gas companies. We are looking to help and partner quality Singaporean companies so that they can leverage on ourselves to expand globally.

We are always open to growth sprouting opportunities and one has arisen in Europe. There is a very good, old marine company in the UK that is looking to export their products into Asia. We can help them achieve that vision and as such, we are actively looking at bringing them on board the Nordic Flow ship. Furthermore, we are looking to bring Multiheight overseas.

As a young company, with a young talent force, we have the energy, will and creativity to grow considerably. I am thrilled about the future of Nordic Flow Group.

[butcher]

Noted Nordic have good growth profile. However, with due respect to RSM Chio Lim, noted Nordic not audited by Big 4. Also its auditors rings a bell to me and noted them being the same as Trans Cab which recently terminated its IPO at the eleven hour.

[thor666]

I think the issue of transcab lies with either the company or the underwriters, rather than the auditing firm. Audit firms do not make assessment on company business but on their financial statements. Correct me if I am be mistaken.

Also, there is no guarantee that a big 4 audit firm will stem out problem companies. You can find a list here

http://en.m.wikipedia.org/wiki/Accounting_scandals

As many vb would say, do your due diligence. I think that is key.

(not vested)

Sent from my D5503 using Tapatalk

[butcher]

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.

[Polaris]

As many vb would say, do your due diligence. I think that is key.

Agree with thor666. Do your own due diligence.

Looking at the shareholding & salary, I think the management's interest is pretty much aligned with minority shareholder's interest.

Shareholding as of 31 Dec 2013:
Chang Yeh Hong - 200,406,625
Dorcas Teo - 29,000,000 (worth abt $3mil now @ $0.106/sh. Her stake was worth $5.8m during IPO @ $0.20/sh).
Eric Lin - 43,500,000
Total diluted number of shares - 400,000,000.
The 3 key shareholders together own 68.2% of the company.

Their remuneration for FY2013:
Chang Yeh Hong - $453k (incl 2% of PBT)
Dorcas Teo - $248k (incl 1% of PBT)
Eric Lin - $229k (incl 1% of PBT)

(minor vested)

[avicii]

Hi Polaris, I am new to this forum and thank you for sharing. Would you elaborate more on "Looking at the shareholding & salary, I think the management's interest is pretty much aligned with minority shareholder's interest"?

[Polaris]

Hi Polaris, I am new to this forum and thank you for sharing. Would you elaborate more on "Looking at the shareholding & salary, I think the management's interest is pretty much aligned with minority shareholder's interest"?

Avicii,

From page 25 of AR 2013,

Directors Remuneration were:
Chang Yeh Hong - $453k (66% Salary, 8% Allowance, 26% Bonus).
Dorcas Teo - $248k (64% Salary, 12% Allowance, 24% Bonus).
Eric Lin - $229k (61% Salary, 14% Allowance, 25% Bonus).

The salary component of Executive Chairman Chang, Executive Director/CEO Dorcas Teo and Executive Director/Founder Eric Lin were $300k, $159k and $139k respectively. The company has a market cap of $42.4mil and Revenue of $66.2mil in FY 2013. In my personal opinion, their salary is not excessive. Especially if you look at the credentials of Chang & Dorcas:

"Chang Yeh Hong is our Executive
Chairman and was appointed to our
Board on 8 April 2010 and was last
re-elected at the Company’s AGM
on 26 April 2012. He is responsible
for the working of the Board; the
reviewing of business plans, strategic
positioning and business expansion
of the Group. He is a member of
our Nominating Committee. He also
serves on the boards of other listed
companies, namely Union Steel
Holdings Ltd and PSL Holdings Limited,
as an independent director and non-
executive director respectively. He
has more than 19 years of experience
in the banking industry. From 1999 to
2000, he was the Regional Managing
Director of Asia Pacific with Citibank,
and from 2000 to 2002, he was the
Global Head of a product group with
Standard Chartered Bank. From 2002
to 2003, Chang Yeh Hong was an
Executive Director of Technics Group
Holdings Ltd. (now known as Technics
Oil & Gas Limited), responsible for
finance and corporate development.
Since he took an executive role with
us in 2004, he has played a pivotal role
in the growth and development of our
Group. He holds a Bachelor of Arts
degree majoring in Economics from the
National University of Singapore and
has completed the Standard Chartered
International Management Programme
in INSEAD Fountainbleau, France and
the Business Financial Management
Programme with Manchester Business
School, United Kingdom."

"Dorcas Teo is our Executive Director
and was appointed to our Board on 30
June 2010 and was last re-elected at
the Company’s AGM on 26 April 2013.
She has been with us since 2003 and
was appointed as Chief Executive
Officer of our subsidiary Nordic Flow
Control Pte Ltd on 1 January 2012.
Her responsibilities include overseeing
our Group’s strategic marketing and
business development as well as
growing our business in the PRC. She
has over 19 years of experience in
the marine and offshore valve remote
control industry. From 1994 to 2003,
she was with Tyco Flow Control Pte
Ltd, where she eventually took on the
position of sales manager. She holds
a Bachelor of Commerce degree with
major studies in Management from
The University of Western Sydney,
a Diploma in Sales and Marketing
from the Marketing Institute of
Singapore as well as a Diploma
in Electrical Engineering from the
Singapore Polytechnic. In 2006, she
was awarded the Spirit of Enterprise
Award in recognition of her inspiring
her fellow Singaporeans to achieve
greater entrepreneurial excellence."

And if you look at the 3 key executive directors combined stake of 68.2% of the company, taken together with the consistent dividends they have distributed (in both the good and bad years) so far, my personal opinion is it will benefit both them, as well as minority shareholders, if the company profits continue to grow, or if the share price (or dividends) go up.

[Polaris]

Noted Nordic have good growth profile. However, with due respect to RSM Chio Lim, noted Nordic not audited by Big 4. Also its auditors rings a bell to me and noted them being the same as Trans Cab which recently terminated its IPO at the eleven hour.

The truth is there is a limit of what auditors can uncover, if the directors/management do not reveal.

In the case of Nordic, Chang Yeh Hong and Dorcas Teo previously worked in MNCs (Citibank and Standard Chartered Bank, Tyco Flow Control respectively). Hopefully (just my blind faith) that means they are more exposed to MNC systems & best practices in terms of reporting.

Also, you will notice that Independent Director, Ong Hua is a member of the Audit Committee of Nordic. She was a Senior Audit Manager of Singapore Health Services Pte Ltd from 2007 until April 2010, when her employment was transferred to MOH Holdings Pte Ltd where she is currently an Assistant Director, Group Internal Audit Division.

The Chairman of the Audit Committee of Nordic is Hew Koon Chan, also an Independent Director. He is currently the Managing Director of Integer Capital Pte Ltd, a business consultancy firm focusing on mergers and acquisitions. From 1988 to 2004, he was an investment director at Seavi Venture Services Pte Ltd, a private equity firm affiliated with Advent International Corporation.

From the above facts you have to make your own call.