The year-end close trading update from Northbridge IS confirms a second consecutive year of profitability, with estimates increasing in reflection of the strong end to the year. Tasman’s momentum seen in H2 19 and Q1 20 faltered in Q2 20 due to pandemic-related manning issues at rigs, albeit with a degree of recovery emerging in Q4 20. Crestchic performed strongly, particularly within manufacturing, with datacentre testing proving to be a strong market.
We have increased our adj. PBT estimate for FY20F to £0.4m (previously £0.0m), reflecting a strong Q4, which included two contracts within the marine sector and a significant y-o-y uplift in manufacturing sales at Crestchic. Recovery within both divisions stalled owing to the pandemic, as loadbank testing sites were closed on account of lockdowns, and Tasman suffered from travel/visa restrictions preventing a full manning of rig crews. H2 proved much better, with stabilisation across its markets during Q3 and recovery in Q4.
It remains challenging to value NBI in conventional terms given its EPS remaining negative. However, it continues to trade at a discount to NAV and ratings more than 50% below its peers. We also note the marked FY20 EV/EBITDA discount to its largest customer, Aggreko, currently the subject of a potential bid.
Add in a ‘greening’ of the Group’s activities noted in recent reports, and we think that the current valuation fails to recognise the strong pipeline of opportunities and potential for further, operationally leveraged recovery.
