Happy Independence Day holiday to my US readers. To give a break to the US traders, this week the potential superstock is going to be a Sing...

Weekly Superstock Scan 4 July 2016 - 8 July 2016: Nordic Group (Singapore)

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Happy Independence Day holiday to my US readers. To give a break to the US traders, this week the potential superstock is going to be a Singapore company. (Actually I just did not manage to find a potential superstock in the US market).




This week's potential superstock is Nordic Group Limited (SGX:MR7). Nordic Group Limited is a systems integration solutions provider serving mainly the marine, offshore, and oil & gas industries. It has quite a wide range of businesses that include:
  • System integration
  • Maintenance, repair, overhaul (MRO) & Trading
  • Precision Engineering
  • Scaffolding Services
  • Insulating Services


Technical



In June Nordic Group broke and closed above $0.20 for the first time with strong volume. Since then it has fluctuated between $0.20 and $0.21. It was only last week that Nordic group had another surge and closed at $0.20.

With no overhead resistance, Nordic group has the potential to move much higher. The $0.20 level is a big round number that has served as resistance since the beginning of 2015. Now that price has broken above $0.20, it is likely to serve as a strong resistance. 

Fundamentals



Consistent Growth with Strong Order Book

Nordic Group has been very consistent when it comes to growth. As at the last quarter, Nordic Group has completed more than 10 quarters of year-on-year (y-o-y) revenue growth and 6 quarters of y-o-y earnings per share growth.

With the strong order book, Nordic Group's growth is set to continue.


Acquisition of AE Group

In June 2015, Nordic Group acquired Austin Energy (AE). The group is able to realise significant synergistic benefits and earnings contribution from the acquisition. The acquisition of AE has also enabled Nordic Group to serve customers in the pharmaceutical industry, thereby diversifying its revenue streams further.

Low Float

Nordic Group has a float of 69 million shares and an average trading volume of 465 thousand shares. This put the float at just 15 times the average trading volume. The stock can easily be pushed up with good results and news.

Cheap Valuation

At current price, Nordic Group is trading at just 9.09 times its annualised earnings. At a low risk entry point, the valuation is expected to be even cheaper.


Risk Factors/ Things I do not Like


  • Dependence on the Oil and Gas Industry - When oil price plunges, as we have seen in the earlier part of the year, the demand for services in the upstream sectors (Drilling, production, transport) is expected to fall. Fortunately Nordic Group is able to diversify the risk by expanding downstream. In the recent quarters, sustained demand for downstream services drove the group's growth.


Potential Trade Setup


As mentioned earlier, $0.20 is the previous resistance that will most probably serve as a support. That is the point I want to enter into the stock.

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Previous Superstocks


JVA (Posted on 19th June Watchlist)
Very strong surge, far off from low risk entry

HBP (Posted on 5th June 2016 Watchlist)
Bounced off exactly at 10wMA, why didn't I enter?

BOSC (Posted on 5th June 2016 Watchlist)
Now it looks like it may approach the 10wMA in the next two weeks.

AVHI (Posted on 29th May 2016 Watchlist)
Bought @ 13.105, exited @12. Bought @ 11.98, exited @ 11.72. To drop now that magic line has flattened.

EHTH (Posted on 15th May 2016 Watchlist)
Bought @ 14.2. Now at 10wMA.

GDEN (Posted on 16th Apr 2016 Watchlist)
Closed way below 10wMA, to remove from watchlist

EXFO (Posted on 10th Apr 2016 Watchlist)
Entered @ 3.8. Exited this week @ 3.5 on disappointing result. To drop.

PLPM (Posted on 27th Mar 2016 Watchlist)
Bought @ 4.28, Sold @ 4. Magic line flattening.

SNC (Posted on 6th Mar 2016 Watchlist)
Entered @ 11.95, sold @ 10.4. To drop as stock has fallen below 30wMA.




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