[AGM]: 5 things I learnt from Nordic’s 2018 AGM

Hello everyone, sorry for the delayed posting of Nordic’s AGM report as I fell sick. Nordic AGM was held at the auditors’ office. I would say about 20 shareholders turned up for the AGM. Here’s what I learnt from Nordic’s AGM.

IMG_1017.JPG

1) On management

The management are experts in their own field of work that they do. From the way the Chairman replied to shareholder’s questions and from my 1 to 1 conversation with Ms Teo one of the executive director, they are all very clear about the Nordic’s business. Chairman also mentioned that he is very focus on generating cash then keeping assets in the company. The independent directors also shared that Chairman have been very forthcoming and would not hide any important decisions from the board. One of the ID said that this is reflected in the successful M&A track record that Nordic has.

2) On their businesses

Chairman shared that the upstream activities in the O&G sector still remains weak but there are more opportunities in the downstream where Nordic have been building up their capabilities in through all the different acquisitions.

Nordic’s business started with providing services in the upstream of the O&G sector before they realise the more lucrative downstream sector. Ms Teo shared that this shift have been pivotal to Nordic’s business and how they manage to stay competitive despite the downturn in the whole industry.

One example that Ms Teo mentioned is how Nordic came in to provide services for major oil refiners like Exxon Mobil and Shell in Jurong Island. She shared how the tight security in Jurong Island meant that these big companies could only source for local companies that are already operating within the island which Nordic was in. This also meant that there are high barriers to entry for any other companies who want to come in to eat their lunch. Due to the high expenditure involved in running their oil refinery business, these big companies cannot afford to have any down time and hence will definitely sought for good services that companies like Nordic provides to ensure safety of their workplace and machineries.

3) On business outlook

Chairman shared that he will continue to strive for efficiencies and synergy between all their acquisitions so that he can continue to bring down the cost. One example he mentioned is how there used to be HR department in every subsidiaries whereas now there is only one HR taking charge of all the different subsidiaries.

For businesses that are not doing well, especially those serving in the upstream, Chairman said that he will continue to right size the company so that they are not making any losses.

Chairman also shared that they continue to pursue the cross-selling strategy to their clients. By bundling up various services in their subsidiaries they are able to provide whole solutions to their clients. Ms Teo also mentioned that many of their clients appreciate the bundling packages as a lot of them would rather not engage you if you are “just doing scaffolding”. Hence, bigger companies engage them to provide whole solutions.

4) On properties & cash

Chairman shared that they have sold 2 out of the 4 properties they have put on sale. One shareholder asked him why he is selling it now when the property prices are not that good. He went on to reply that he rather keep money in cash then in assets.

Nordic’s war chest remains big at about $40 million, and Chairman believes that give them a good buffer to acquire any company that fits into Nordic’s game plan. As of now, the Chairman do not see any potential acquisition after Ensure.

5) On share buyback

I asked the management on what grounds does the management deemed that they should buy back shares. The Chairman said that they will buy back shares, either via the company or in their own capacity when “they feel that the share price does not reflect the true value” of the share. They do so in a systematic way and Chairman stressed that he will not use the company’s money to pursue aggressive buyback such that their cash needed for their core businesses gets affected.

Perhaps that’s why Nordic seldom conducts share buybacks but we could see their Chairman and Ms Teo scooping up shares in the open market. The last price that one of the management bought from the market is around $0.57. That could mean that given the current price the management still feel that the share price is below the intrinsic value.

In conclusion,

Nordic continues to live up to the reputation of a well-run company who defied the odds being in the O&G sector. Unlike their counterparts who have posed losses and some even going bankrupt, Nordic have been able to steer clear of these challenges. I believe this will only make Nordic stronger going forward. To share something I heard, the management is very excited about Ensure as there are strong demand for Ensure’s services by their customers. They have never seen such a good acquisition before, the margins are good and there is relatively few competitors. I will leave it at that and you can go decipher what that means. Haha!

PS 1Q results to be out in 9 May as shared by Chairman

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s