Northbridge Industrial Services

www.northbridgegroup.co.uk TICKER: NBI     EXCHANGE: L

Northbridge was set up in 2005 as a 'buy and build' operation in the industrial services sector. Since that time it has grown substantially to become a global business with sizeable revenue streams in both sales and rental of heavy duty industrial equipment including loadbanks, used to test the power output of large generators and motors, transformers, and generators, as well as a significant business in the oil services sectors. This was substantially enlarged via the acquisition in 2010 of Tasman Oil Tools in Australia but the group also has a sizeable customer base in the Middle East and Caspian Basin. Acquisitions have produced significant opportunities for cross selling and customer sharing. Rental revenue, which enjoyed very high margins, is becoming the predominant source of turnover, something of a deliberate strategy by the group's management in recent years.

LATEST REPORTS

 
Bolt-ons reinforce attractions
Published: Dec 19 2011

Northbridge sells and rents products such as power generators, loadbanks, compressors, and oil and gas field equipment. They have just announced the acquisitions of Loadcell Services and DSG Rental, respectively based in Singapore and Belgium
Loadcell is in Singapore sells and rents drilling equipment and instrumentation to oil industry clients in Vietnam and Indonesia. The total consideration equates to 2 x revenue if profit targets are met
DSG Rental, based near Antwerp, has been purchased for a total consideration of up to 2.9m and specialises in containerised transformers and switchgear, and services clients in Europe, Africa and the Middle East. The company is highly profitable, with EBITDA/Sales of 61%. 
DSG fills out the loadbank/transformer rental offering and adds additional customers and products. Loadcell complements the much larger purchase of Australian-based Tasman Oil Tools earlier this year. The fit with other aspects of the group's operations is also good and there are considerable cross selling benefits and customer complementarity in both new acquisitions
Northbridge shares have fallen along with the market since the interim results to a price of 212p, which leaves the shares on a 2012 earnings multiple of 8.3x, too low a rating for a business predominantly operating outside of problematic European economies
 
Better than billed
Published: Oct 11 2011

Northbridge was formed to pursue a 'buy and build' strategy in specialist industrial equipment sales, rental and services.Their interims produced an adverse price reaction, despite a solid dividend increase.Yet the encouraging outlook for 2012 contradicts a downbeat assessment.
Strong cash generation and low gearing provides the option to make further acquisitive moves. The group's past track record in this area gives confidence that any acquisitions can be successfully absorbed. Attractively-priced opportunities are available and should be able to be financed without recourse to additional equity
We expect pre-tax profits for the full year to reach close to £4.7m and produce unchanged EPS of 24.8p. DCF analysis supports a medium term target price of 300p, compared to the current price of 234p. A tentative longer term price projection suggests values in excess of 400p on the basis of current relatively low discount rates. 
 
International expansion aids profitability
Published: Apr 04 2011

Northbridge was formed to pursue a 'buy and build' strategy in specialist industrial equipment sales, rental and services: it listed on AiM in 2006, and management has extensive experience in this area

Full year results showed the benefits of its careful acquisition-led strategy flowing through, with improved margins resulting from the acquisition in mid 2010 of Tasman Oil Tools and its high proportion of predictable rental income. Margin growth is set to continue, underpinning profits.

The placing accompanying the Tasman purchase also brought in a number of prominent institutional investors, including Artemis and Blackrock each holding just short of 10% of the shares. The company's market capitalisation is now well over £30m, a fact that should bring it further to the notice of small and mid-cap growth company fund managers. The shares have risen from around 133p at the time of the Tasman acquisition to 221p now.

DCF valuation, as well as 7.9x PER and 2.4% yield for 2011, underpin a 290p per share medium term price target and a longer term goal of 475p.
 
Scaling up
Published: Sep 30 2010

Interim results for Northbridge were up to market expectations and the company is on track to make pre-tax profits in the region of £3.6m for calendar 2010. Profits have benefited particularly from the continuing shift in sales mix towards the higher margin rental side of the business, in which the company has been investing heavily for some time. The acquisition of Tasman Oil Tools in Australia has been completed successfully and will further enhance underlying margins.

The shares currently stand on an earnings multiple significantly under those accorded similar companies, and we believe there is scope for the rating to improve significantly. This is confirmed by a conservatively constructed discounted cash flow valuation. On balance we believe a target price of 300p (current price 186p) is more than justified on a one-two year view. 

 
Ideal acquisition
Published: Jul 08 2010

An established operator in industrial services with very experienced management

Strong focus on international operations and high margin rental

Acquiring Tasman gives presence in Australia and strengthens position in Oil &Gas

Fair value share target remains 200p, versus current 133p level
 
Positioned on growth markets
Published: Mar 30 2010

'Buy and build' operator in industrial services

Exposed to attractive markets in power generation, renewables and oil & gas

Forecast recovery in profits for 2010

PER, yield and DCF considerations all support considerably higher price
 
Attractive low rating
Published: Oct 15 2009

 'Buy and build' operator in industrial services sector

 Growth markets in power generation, renewables and oil and gas

 Acquisition programme likely to resume in due course

 Target price of 200p short term; 295p in the long term.

ARCHIVE

2009
Performing strongly
Published: Apr 06 2009

Excellent full year results

Acquisition strategy well executed

Forward PER of 6x suggests significant undervaluation

Robust trading update
Published: Feb 04 2009

Northbridge recently issued a pre-close season trading statement covering the year to 31st December. Management states that since the update announced at the time of the interim results, trading continued to be strong in all its markets for the whole of the second half of the year. It further noted that trading results for 2008 were likely to be ahead of market expectations.
2008
Impressive progress for buy and build strategy
Published: Mar 18 2008

Experienced managed team

Growth markets in power generation, renewables and oil and gas

Successful acquisition programme to date

Positive results released with record order book

Fair value per share seen at  200p short term, 260p longer term: vs current 147p

A group engaged in hiring and selling industrial equipment.