"The continued resilience of Asian economies amidst current global macroeconomic uncertainties, Singapore’s capital market reforms and Nordic’s exposure to secular growth trends in tech, defence, and sustainability will also act as enablers for Nordic’s growth in the longer term, making it an attractive investment opportunity, in our view," he adds.
Last month, US semiconductor firm Micron Technology announced an investment of US$24 billion over the next decade to expand its facilities in Singapore and Nordic is set to benefit from "stronger tailwinds".
The expansion includes a substantial 65,000 sqm increase in cleanroom capacity, which Goh says will require water and hydraulic management systems, which are critical to the high purity cleaning processes required in wafer fabrication.
"As an existing provider of hydraulic solutions through its subsidiary, Envipure, we believe that Nordic is uniquely positioned to capture these opportunities," says Goh.
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"With the facility’s targeted operational commencement in the second half of 2028, we anticipate that this project will have a medium-to-longer term impact on Nordic’s growth profile rather than an immediate one," he adds.
In addition, Nordic plans to be in the worker dorm market too, targeting a "meaningful" 800-bed capacity presence. This will have the effect of helping the company save on accommodation costs estimated by Goh to be around $4 million a year, equal to 27% of the company's FY2024 administrative expenses, which suggests a "sizeable uplift" to net margins.
"While compelling, the project is contingent on regulatory approvals and construction timelines, meaning the benefits will likely materialise in the medium-to-long term," warns Goh.
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Also, Nordic is boosting synergies between its various operating subsidiaries. Specifically, it is implementing cross-training programs across Avon and Starburst, so as to drive labour flexibility and optimising resource allocation.
"This initiative broadens the skillsets of its engineers, enabling redeployment without incurring costs associated with just-in-time hiring or outsourcing.
With economies of scale, this move is seen to yield sustainable cost savings and improve overall margin resilience, says Goh.
As these various developments take time to manifest at the bottom line, Goh is keeping FY2026 earnings estimates and therefore his fair value of 59 cents for now. - The Edge Singapore
Nordic Group shares dropped 1.98% to trade at 50 cents as at 9.50 am. It is up nearly 46% in the past year.
