Northbridge has issued a trading update giving a degree of clarity ahead of 2019 results. Q1 trading has been strong in some areas (Crestchic manufacturing) and weaker in others, reflecting the limits on the movement of personnel and equipment across borders as nations struggle to contain the pandemic.
However, we draw comfort from the experience of Northbridge in handling previous crises, a high NAV per share and expected rising demand for gas in Australia during Q2 and Q3. Together, they suggest the share price is already discounting an elongated recession.
The recent lockdowns across many nations have meant difficulties in moving personnel and equipment across borders, coupled with the temporary closure of numerous industries. Such trends are beginning to impact both divisions. As a result, Management has suggested that Q2 and Q3 are likely to prove quieter than expected. As such, and with no imminent control over the spread of COVID-19, we feel that it is sensible to suspend our financial estimates until greater clarity is forthcoming.
As at 30 June 2019, the Group’s NAV stood at £36.3m (2018: £36.5m), or 128.5p per share (2018: 129.3p). We would expect the current NAV to be little changed, so standing at a hefty 86% premium to the current share price. The NAV is backed by freehold property in the Group worth £4.5m and by the rental fleet, a further £18.5m.
We still believe that the Group’s long-term fundamentals remain positive, reflecting the growing requirement for the commissioning and testing of datacentres, hospitals, power grids within Crestchic, and a leading market position in Australasia at Tasman. Although our estimates are suspended temporarily, we see Northbridge’s underlying value as well reflected by its NAV, i.e. 129p / share.
