Nordic Group has revealed, in recent months, that it has an internal target to grow its profit 20% a year (See: ). 

 

9M17

9M16

% change

Revenue

$70.8m

$63.0m

12

Net profit

10.9m

$8.9m

22

Operating cashflow

10.3m

$5.0m

106

With its 9M2017 profit hitting S$10.9 million, Nordic needs another S$4.3 million to achieve 20% growth this year. It's a big number, certainly.

Stock price

56 c

52-week range

23 – 57c

PE (ttm)

15

Market cap

S$218 m

Shares outstanding

393 m

Dividend 
yield (ttm)

2.5%

1-year return

155%

Source: Bloomberg

(2016 profit was S$12.7 million, so 20% growth this year would take it to S$15.2 million).

How it will get there is probably not an issue considering that it has a record order book and its acquisition of Ensure Engineering in April 2017 will help bump up 4Q17 profit vis-a-vis 4Q16.

Instead of 2017, Nordic's executive chairman, Chang Yeh Hong, dwelt at some length on how the group would go about achieving 20% profit growth in 2018.

This topic during the 3Q17 results briefing takes up 5 slides in the Powerpoint presentation uploaded to the SGX website

changyehhong11.17b"The earnings-accretive acquisition of Ensure has been bearing fruits for two consecutive quarters. Ensure has enabled our Group to diversify away from the key sectors which we operate in previously and allowed government agencies to be added onto our growing customer base. Our M&A strategy has proven to be viable in driving revenue and earnings growth and significantly managing our risk profile."

-- Chang Yeh Hong (photo), 
Executive chairman,
Nordic Group
(Photo by Leong Chan Teik)

Here are Nordic's "building blocks" for a great 2018: 

1. $99.4 million orderbook for next 1 to 3 years: This encompasses work for the oil majors on Bukom and Jurong islands in Singapore.

 

As in the past, the orderbook will be progressively fulfilled and replenished. 

2. Full-year contribution from Ensure Engineering: As Ensure was acquired at end-April 2017, its contribution will be most noticeable in Nordic's 1Q18 results vis-a-vis 1Q17. It will, of course, be a flag bearer for the rest of the year too.

3. Carbon Allowances: This will deliver a one-off gain. For the first time, Mr Chang revealed that there is a guaranteed price by the counterparty, which will see Nordic reap a minimum gain of about S$900,000.

He added that the upside is substantially more if provincial carbon papers are converted into the national system next year.

4. Right-sizing Nordic's system integration business: This segment serves shipbuilders and builders of oil & gas assets such as rigs, and has turned in a loss for the first time this year.

Various initiatives will slash about $2.3 million in operating costs next year, including reducing headcount in its Suzhou operation ($1 million) and cutting salaries of two directors by 40% ($188,000).

5. Consolidation of business premises:  Nordic is looking to sell 5 Kwong Min Road and 24 Benoi Place where its Nordic Flow Control, Austin Energy and Multiheight Scaffolding subsidiaries operate.

Austin warehouse6.15Austin Energy warehouse at Benoi Place.
NextInsight file photo
They will move to 2 Tuas Ave 10, which has recently been purchased. The consolidation is expected to achieve synergies and cost-savings which Nordic said cannot be quantified at this point.

There will also be benefits from the fact that the new premises is just across the road from Ensure Engineering's.

6. M&A: Nothing firm yet but Nordic has made three acquisitions (in 2011, 2015 and 2017) which have contributed handsomely to the group.

Look to Mr Chang, a former StanChart banker, to make the No.4 acquisition another winner.  (See how he sniffs out the right acquisitions: ). 

As the building blocks for a 2018 record profit take shape, the share price of Nordic (currently 56 cents), whch has reached all-time highs, could track further upward.


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