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Monday, 1 November 2010

Nordic Group Limited

Nordic Group Limited ("the Company") is offering 110m New Shares (2m for public and 108m via placement) at $0.20 each.  Established in 1998, the Company is an automation systems integration solutions provider serving mainly the marine and offshore oil & gas industries.  The Company has an order book of $37.4m at the date of prospectus and intends to distribute up to 30% of its net profit after tax for FY2010 as dividends. The IPO will close on 8 Nov at 12pm.

Revenue grew from S$19.2m in FY2007 to S$41.9m in FY2009 and net profit after tax grew from $2.35m to $8.4m in the same period.  Based on fully diluted basis, the EPS for FY2009 is Singapore 2.1 cents and that translate into a historical listing PER of 9.52x. For the 3 months ending 31 March 2010, the EPS is 0.5 Singapore cents, implying a growth of 66% over the same period last year. Assuming EPS for FY2010 grew by a moderate 30%, the EPS will be 2.73 Singapore cents and that translate into a forward PER of 7.3x. A fair value range of 7-10x will indicate a price of 19c to 27c. 

The issue is more fairly priced this time round and for a company that is exposed to the oil and gas sector with 'generous dividend' being promised, i guess the downside at 20c is limited.  However, as it is, the company is still a small cap company at $80m and has generous service agreements with its key management.  In addition, we are not privy to who the shares are being placed out to. It will be difficult to get it from the public tranche and with IPO sentiments turning sour, I would give it a miss as the small lots you get from the public tranche may not cover your selling commission.


smith said...

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ernest said...

With regards to your blog content, why do you describe the IPO sentiment turning sour?

2Y Capital said...

Hi Ernest,

This is because the recent IPO all went below their offer price, no investors would "dare" to buy into new IPOs.

ernest said...

I think u'r rite but singaporeans are smart bunch of investors, they learn to avoid chinese coy listed on sgx or companies that are overly priced (such as oxley).
However, this company has good prospect and singaporeans are still flush with lotsa liquidities (just observe the prevailing interest rate and the speculation of small caps), I guess there might still be many people out there demanding such small caps

ipo-maniac said...

while it depends on what the IPO sentiment is, but turning sour doesn't sounds like what is going to happen right now. All IPO are riding this up-trend and the smaller coys can benfit from the progressive periods. Nordic is fairly priced but wait till the lottery lots get allocated to you :)

Brandon said...

i dun understand sour sentiment... IPO are all priced at higher than offer price at openings.. so rational investors will take profit at openings, causing price to goes down.. den buy again only they feel that its bargain buy.
If u expect price to maintain n move upwards after openings, u need Temasek holdings as support.

If u feel Nordic is not worthy bidding, then u feels that it will open at a price lower than 0.20???

With 2m shares offer to the public, a rookie investors will definitely know it will be oversubscribe.
Does oversubscibe means will open at lower than 0.20 on wed???
Ans: ofcos not!(in case u still can't get it)

2Y Capital said...

Didn't i rate this company as 2 Chillis and say that downside is limited for Nordic. Which part of my post did i say that Nordic is not worth bidding? I am saying that with only 2m shares for public (different story if you are a placement shareholder), how many lots will you realistically get? If you are only given 1 lot and you sell at 25c, your net profit is $28 max. Is it worth the effort? To me, the low probability of getting it and the low net profit amount is not worth the effort, but if you think that it is worth your time and will likely get it, please apply for it.

Secondly, there is "nothing for me to get it". Over-subscription in the public tranche doesnt always means that the share price will open above its IPO price and let you have enough time to get out. I have seen enough IPOs that open above its IPO price then tanked below its IPO price on the first day within minutes as there are no follow through buying and there are too many placement shareholders dying to cash out.

Perhaps, the phrase "IPO sentiments turning sour" is too strong a word for everyone? hahaha But assuming if you are a recent IPO player and you bought Anchun, Xin Ren and Mun Seong at the opening prices. Do you still dare to 'support' Nordic next week when it opens for trading? Well i am not too sure.

Anyway, good luck to all who are applying. :)

Anonymous said...

Nordic very gd leh.

Dunno will be like kreuz or yamada

teacherlet said...

it opened quite high today but tanked to ~25 cents by closing time.

just saw on today's straits times that most investors were allocated only a few lots. maybe one/two/three.

there really isn't much hope of making much S$ from this trade. hmm.

mr 2Y Capital, your analysis is really rather accurate. :]

what are your thoughts about the pending sabana reit?

2Y Capital said...

Hi Teacherlet,

I am not sure how a "syariah-compliant real estate investment trust" works but i believe the downside should be limited given the yield is > 8% (but not sure if they pay out interest in units to holders instead of cash....)

Ipo hunter said...

For mewah if you look at their recent developments section, they made profit of 17 m for July and august ... Almost 50 percent of what they made in first 6 months. Their prospectus also says that they have stronger sales in the second half of year due to various festivals such as ramadan and deepawali and also Xmas falling in this period. Going by the trend of first two months of second half, they may match last year performance.

Wilmar's palm oil business similar to mewah made more profit this quarter than the last year. They lost money in oilseeds business.

Their established brands, sales in 100 counties, strong africa and middle east sales are interesting.

2Y Capital said...

IPO hunter, thanks for pointing that out, i will have to relook at my model again. :)

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