Friday, March 21, 2014


NSL: ($1.86) FY13 earnings surge on associate stake sale; bumper $0.50 per share dividend As expected, NSL’s FY13 net profit spiked 218% to $148.6m, mainly boosted by a net gain of $121.7m from the sale of associate Bangkok Synthetics (BST) in Nov '13. Excluding contribution from BST, NSL’s core pre-tax profit would have increased 13% to $27.2m, in line with the higher revenue of $507.7m (+21%), driven by higher sales volume from its precast operations in Singapore and the regional dry mix business, as well as higher spreader deliveries and improved product mix under its Engineering division. Investors will likely cheer the special dividend of $0.40, in addition to the usual final dividend of $0.10. Following the combined payout of $0.50 per share (26.7% return), NSL will still be left with net cash amounting to ~$0.62 per share. Coupled with NSL’s strong cash generative core business (FY13 operating cash flow of 7.7¢ per share), this could inspire hopes of another round of special dividends to be paid in future, particularly if the group is unable to find new businesses to invest in. Market Insight retains NSL as a constituent in its model Value portfolio. The counter is a deep value asset play with re-rating catalyst to come in the form of capital management. NSL trades at 1x P/B, though valuation narrows considerably to 0.4x on an ex-cash basis. Similarly, the counter trades at 12.8x adjusted P/E (ex-cash). NSL: ($1.575) Add to Value portfolio on bumper dividend hopes SGX has no objections to grant NSL a waiver from seeking shareholder approval at an EGM, prior to the proposed disposal of its 22.8% stake in Bangkok Synthetics for $328.3m. Instead NSL would only need shareholders to ratify the deal. This paves the way for a smooth completion of the disposal, which will allow NSL to unlock $0.88 per share, or 55% of its market cap, from a non-core investment. With NSL’s net cash hoard set to surge from $76.6m to an impressive $404.9m ($1.08 per share), this will likely inspire hopes of a sizeable capital distribution. Meanwhile, investors get paid to wait as NSL has been consistently paying $0.10 dividend p.a. (6.4% yield) for many years now, supported by its strong cash generative core businesses. NSL shares have gained only 9%, or $0.135 per share, since the proposed disposal was first announced on 18 Nov, compared to the estimated gain of $0.32 per share that it stands to book on sale completion. Market Insight still sees upside, and adds NSL to its model Value portfolio.

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