Northbridge Industrial S... Share Discussion Threads

[the millipede] 31/10/2015 00:49

Well, except that if the price is dropping then obviously some people have managed to sell?

The positive news is that the overall volume seems to be tailing off and some of the lowest priced trades, that presumably must be sells, are very small indeed..... just hundreds of shares.

That said, volume was low when this stabilised briefly at 120p ish and then it picked up again...

[pixi] 30/10/2015 22:05

Still in free-fall, very easy to buy and difficult to sell.

[the millipede] 28/10/2015 18:42

I have taken a small bite here. Obviously if it keeps falling I will look a bit silly but I will probably let it ride and see where we end up.

My perspective is that NBI's problems are essentially down to a decreasing oil price and uncertainty in the minds of their customers. And my punt is that things will stabilise around the $45 to $55 level (ie more or less where we are now) and that the price stability should start to feed through into Northrbridge's contracts going forward.

I think this is a decently run outfit - I think criticism of the directors' response to a changing business environment is overdone although not surprising given the cataclysm suffered by long term shareholders. And I think it is highly unlikely there will be an issue with covenants when the company can still make its payments.

Absolutely I understand everyone else's perspective and I agree there are risks which might go the wrong way.

[wigwammer] 28/10/2015 17:28

Actually, it's the ev:sales that is beneath trough, not the ev. So I guess it depends on how far sales fall.

[wigwammer] 28/10/2015 15:57

Some thoughtful posts mh, thanks. Way I see it - enterprise value is currently below any historic trough, and that's a history which included some pretty difficult macro situations.I thought your point about low operational leverage was both relevant and correct - it is low - the large asset base is effectively a sunk cost, enabling high levels of margin and cash generation when necessary ie presumably now. Personally I prefer cash generative companies that have debt to those without, as long as the valuation is right. Reason being it focuses the attention of management on paying the debt down rather than p1ssing it away. I'm in with an average of 92p, speed of the fall alone suggests capitulation. An interesting one.

[moathunter] 28/10/2015 10:20

I've changed my mind and now sold. Agree with you Topvest that there is still some downside risk with this company and not enough upside probability. My previous rough intrinsic valuation was too optimistic.

The £18m net debt is considerable for a company of this size and faced with this type of macro oil unknowable risk. The value of the company to equity holders might be really quite small (well below £10m), given that we're obviously junior to the debt.
But it's on the watchlist.

[topvest] 27/10/2015 21:24

I've put it back on my watch list, but think it's too early to re-enter at this stage. I would want a positive signal first, rather than catching a falling knife. Sure, I won't catch the bottom but I sold my residual shares at 203p in June (wish I'd sold them all at the top). Look what has happened since! On balance, I think this company will survive to fight another day...but I'm not ready to gamble on this quite yet. I would like to see the 2015 results first or resolution of any covenant issues.

[moathunter] 27/10/2015 16:20

This seems very cheap at £13m and personally bought.

-Valued at £70m a year ago.
-Fallen 50% in the last month although the interim was issued before then.
-It looks conservatively able to generate £3m free cash flow in the future, since recent sales growth in the last 4 years resulted in growth of working capital which drags down cash generation.
£3m / 0.08 = £37m valuation of the company minus £18 net debt = £19m rough valuation to equity holders (back of envelope calculation).
This would match an asset valuation based on only tangible book value of £22m and ignoring manufacturing know-how, distribution rights, customer relationships developed etc.

-About to enter the US leasing market = big potential.
-14% director ownership which is sizeable (mainly NED and also chairman Harris).
-They acted very forthright in cutting back loss-making operations, given the ‘bullwhip̵7; nature of oil prices hitting capex spend of their clients (imagine bull whip in the hand where a small movement leads to a delayed and very sudden effect on the other end; drying up of orders).

-Gearing is a bit high at c.0.7 of tangible book value, but interest cover of the past was over 11x so it still should be fine as shown with 1.7% dividend yield being offered.
-It is not operationally leveraged with fixed costs representing around 15% of total costs, so a drop in sales to say £25m should not lead to big losses (esp. with selling loss makers).

-Certainly it is unfortunate in recent years to have acquired (not good compared to organic growth) and used debt to acquire.
But the business model of lease and selling outright + diverse client industries + core businesses trading since 1980s + stable long-term demand for loadbanks… all suggests that this company should pull through what is an external event of oil prices (and not some internal problem).

See what happens over the coming year or two.

[smithie6] 27/10/2015 15:38

..standing back a bit from NBI for a moment..

NBI perhaps needs a refresh of the bod since this lot have messed up by excessive capex as oil price/sector fell

If last new dir. (Asian div. boss) is not an 'oily'...then phps need an oily on the bod & phps lower % of qualified accountants....since high % accountants didnt work.

[the millipede] 27/10/2015 12:20

This is true. This is not without risk. But UK/EU remain very cash generative and profitable.

Anyway, you are right. The picture is not clear, but IMO that might be why the share price is 70p and not £2.50.

[bookbroker] 27/10/2015 10:32

Problem is depreciation, and servicing the debt, no one quite knows what the trading performance is currently! Very operationally geared!

[the millipede] 27/10/2015 10:29

Against total assets of £73m including property, plant and equipment worth almost £37m.

I am not convinced there is going to be a huge problem here unless the oil scene deteriorates further.

[the millipede] 27/10/2015 10:26

There are various things on the balance sheet under liabilities. Total is around £32m but I assume not all of that is bank debt. Financial liabilities (current and non current) sit at just over £20m.

[ottrott] 27/10/2015 09:55

According to stockopedia net debt 16.2m, net fixed assets 36.9m. Similar ratio debt/assets as LVD, SDY.

[the millipede] 27/10/2015 09:52

Thank you. Bonus question: anyone know what the covenants are based on?

[bookbroker] 27/10/2015 09:17

£30mln or so, back by some decent tangible assets, but if they are idle and depreciating all the time they are off little use to NBI!

[the millipede] 27/10/2015 09:09

How much debt is there?

[bookbroker] 27/10/2015 08:48

Could see the banks pulling the plug and flogging to a vulture fund!

[countryman5] 27/10/2015 08:21

APR agreed takeover

[the millipede] 27/10/2015 07:55

It seemed to cheer up a bit during the day. Around the time you posted I was quoted 70p to buy...... by the end of the day the quote was 72p.

I am veering between temptation and steering well clear here. Obviously if they turn this around and make even half the profits they used to then current prices will be seen as exceptionally good value, especially with some sort of dividend.

But their comment - can't remember if this was in the last prelims or interims - about oil markets rebounding quickly worries me a bit because (1) I do not think they will and (2) it implies the company is waiting for changes to happen rather than taking control of the business and making sure it works in all oil price environments.

Right now it is so bloomin unclear what might happen. Declaring the interim dividend presumably implies a certain confidence but, of course, it could also imply complacency. Do people who run businesses like this genuinely have the skills to change the business quickly and competently in the face of such a dramatic change in their market environment like a halving of the oil price? Warren Buffet does not touch turnaround plays (that does not mean they are not worth investing in) but I wonder if partly it is about the problem that the management who did not see the change coming are then charged with dealing with it........ which might not be ideal.

BWDIK

[smithie6] 26/10/2015 13:06

Sp down again today....9%....not popular at the moment....

[smithie6] 23/10/2015 19:10

Plan B....

The rental kit for drilling is imho limited to drilling sector....which of course is not pretty at the moment...

Be interesting to see how the other parts of the co. fare ...

'Screwed'.....I guess the fall from 600p to 75p agrees with you...


( if they had stopped capex immediately the mkt saw the oil price break down thru support...the debt level now would be much more manageable now imo..the MD should take large part of blame and half wages to 200k..or leave..imho)

[the millipede] 23/10/2015 14:05

Smithie - it was not really an attempt at logic! I get you - but could they be? If NBI sell mainly to Western majors or others that are cutting back projects - and there is no plan B - they are screwed IMO.

[smithie6] 23/10/2015 13:40

Covenants

..imho the co report says that they cant meet em.....
Although us PIs ignored those words...

...imho that area is probably the cause the share price fall

(..note...' no new news'.....that cant meet covenants was already disclosed...that risk coupled with ratios of bank debt are creating some sellers imo....

But Warren often likes to buy when others are fearful....
Interesting times.....I guess big private holders are sweating !...incl. MD & chairman...

Chairman sitting on paper loss of a few million pounds !!!!!

[smithie6] 23/10/2015 13:34

Milli
...oversupply of oil...

From Saudis..

Not a customer of NBI
...so I think your logic is a bit off target...