NSL Ltd - CIMB Research 2017-03-29: Net-cash conglomerate

NSL Ltd - CIMB Research 2017-03-29: Net-cash conglomerate NSL LTD. N02.SI

NSL Ltd - Net-cash conglomerate

  • NSL’s key businesses are precast concrete components and prefabricated bathroom units. It also has an environmental service unit.
  • NSL divested its dry mix business for a cash consideration of S$155.3m in Dec 16A.
  • Net cash (Dec 16A) formed 67% of NSL’s market capitalisation (as at 28 Mar 17).
  • NSL trades at historical FY16A P/NTA of 0.97x and historical dividend yield is 14.6%.

What it does 

  • We reviewed NSL’s FY16 Annual Report, which was released on 22 Mar 2017. 
  • NSL is a leading industrial group listed on the SGX since 1964. Its key business segments are precast and prefabricated bathrooms (PBU) and environmental services. 
  • NSL also has a majority stake in Raffles Marina Ltd, Asia’s premier marina club, in Tuas, Singapore, and an associate in Germany, PEINER SMAG Lifting Technologies GmbH.

Precast and PBU division 

  • The precast and PBU division is a market leader in manufacturing precast concrete components in Singapore, Malaysia and Dubai while the PBU business is a dominant producer in Scandinavia. 
  • Management guided that the precast business in Singapore and Malaysia remains very competitive, with downward pressure on project margins.
  • However, management notes that the precast operation in Dubai and the PBU business in Finland are expected to perform satisfactorily, underpinned by a healthy order book.

Environmental services 

  • The environmental services division is a key player in integrated environmental services in Singapore, covering the treatment and logistics services of oily and toxic waste for both land and marine sectors. It is also a major distributor of automotive diesel oil and other petroleum products in Singapore. 
  • Management guided that business for this segment is likely to remain stable in light of the recovery of the manufacturing sector.

Other key investments 

  • NSL owns a 72.1% stake in Raffles Marina Limited. According to the Annual Report, Raffles Marina generated S$12.9m in revenue but made a loss of S$3.9m in FY16. 
  • NSL also holds a 33.33% stake in PEINER SMAG Lifting Technologies GmbH, where the key business is the manufacture, design and sale of container and bulk handling equipment. NSL’s share of this associate’s FY16 profit after tax was S$1.8m.

Net-cash balance sheet 

  • As at FY16A, NSL’s net cash was S$430.3m or 67% of its market capitalisation as at 28 Mar 2017. NSL declared a final DPS of S$0.05 and a special DPS of S$0.20 for FY16A.
  • In Dec 16, NSL divested its dry mix business for a cash consideration of S$155.3m.

Historical valuations 

  • As at 28 Mar 2017, NSL was trading at a historical FY16A P/E of 46.5x (based on continuing operations) and a historical FY16A P/NTA of 0.97x. NSL’s historical FY16A ROE was 2.1% and the historical FY16A dividend yield 14.5%.

Target Price: N/A

William TNG CFA CIMB Research | http://research.itradecimb.com/ 2017-03-29
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