We retain an upbeat view of Northbridge and the latest update confirms a second consecutive year of profitability. Considering the significant disruption experienced by the global economy from mid-Q1, the likely outcome of broadly unchanged revenues and delivery of a modest profit is a very acceptable outcome.
The outlook for the Group remains positive, with record manufacturing order books for a third consecutive year at Crestchic, aided by recovery at Tasman as deferred contracts come on stream. Add in strong growth in the underlying renewables and datacentre markets and that points to a much stronger FY21F.
Looking ahead, we forecast a recovery in H2 revenues, rising 6.7% sequentially and by 1.7% y-o-y, which follows a 4.8% y-o-y reduction during H1. The rebound in H2 reflects a stabilisation of its markets during Q3, with growth returning in Q4 as relative normality returned. This was driven by the strong recovery in manufactured loadbank sales from Crestchic as the record order books were invoiced. H1 revenues, driven by a strong performance in Q1 (Tasman up over 80% y-o-y), highlighted the strong momentum within the Tasman business in the early part of the year.
The pipeline of opportunities across its portfolio remains encouraging: in datacentres, renewables and the start of deferred projects, in the US loadbank sales and rental market. Significant opportunities also lie in both existing and emerging energy markets (hydrogen, carbon capture, grid infrastructure testing and battery farms), marine and the recovery of hire rates.
On a projected NAV/share of 109p, the shares are trading on an underwhelming price/book value rating of just 0.8x. In addition, a peer group comparison on a FY1 Price/sales basis confirms our belief that Northbridge remains overlooked and the valuation fails to reflect the strong pipeline of opportunities available to the Group as economies recover.
