NORDIC GROUP: On share buyback spree

NORDIC GROUP HAS BEEN buying back its shares regularly since Sept 2015, signalling that its stock is undervalued vis-a-vis its business fundamentals. (see table)

Its volume-weighted average purchase price of about 18.3 cents translates into a PE of about 6.6X and a trailing dividend yield of about 5.7%.

That's cheap and, as is often the case with persistent share buybacks, reflects the management's confidence in its business prospects and assessment of challenges and its ability to execute strategic plans. 

(At some companies, unfortunately, share buybacks are negative for shareholder value because the shares are bought at overvalued prices and at the cost of reinvestment in business growth.)

Nordic Group executive chairman Chang Yeh Hong at the recent 1Q16 results briefing. Photo by Colin LumAt Nordic, the buybacks -- underpinned by the company's strong free cashflow -- are a good way to allocate capital and serve the interests of all shareholders for another reason: Nordic's near-term earnings are ready for a jump.

Acquired in June 2015, Austin Energy made its maiden 1Q quarterly contribution this year, substantially helping to boost Nordic's earnings 60% y-o-y to S$2.3 million.

Austin will again figure prominently in the 2Q results of Nordic Group, which has proven to be a stable and growing business that is largely into providing scaffolding and insulation services to oil majors.