Good stocks to invest
In the midst of this very challenging oil and gas period, the lesson learnt is that no matter how defensive certain segments in the industry does, in the end, if the industry suffers, all your customers will lay in to you, unless you are a sole sourced provider. (My full analysis here)
Nordic Group operates in the scaffolding and insulation space of the oil and gas industry.
On 12 Jan they put out an announcement that they had renew many of the maintenance contracts with a duration of 1 or 2 years with several of their petrochemical and pharma customers.
While the oil and gas industry suffers, these refining spaces still needs to keep them in good condition due to strict regulations. If they are not safe they cannot operate.
With low oil prices, refining functions need to do well to offset the poor performance in other areas.
The dollar value stated in this announcement look small at $7.7 mil considering we are trying to target a $10 mil/year earnings.
The margins for these maintenance should be much lower than their maintenance projects. Note that these maintenance are daily man power and resources maintenance around the facility whereas there is another maintenance projects that is done every 2 to 3 years during plant shutdown.
The latter will be more lucrative.
The latter in this case may get delayed.
But essentially they have more or less secured the cash flow for the next 2 to 3 years.
Its what happens in the future when the oil majors Exxon and Chevron decides to delay the maintenance projects.
Share price of Nordic Group still holding strong in this onslaught. I believe their holders are strong holders.
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– Good stocks to invest