NSL Ltd - Prefab and Precast Steel Supplier

One of the participant of the 1st Sharing Session with T.U.B asked: " With so many steel companies in your portfolio, why haven't you considered NSL Ltd?"

Thus, I decided to take a look at the financials of NSL Ltd.

Profile In Short

NSL Ltd, through its subsidiaries, manufactures and sells building and refractory materials, and road stones in the Asia Pacific. It operates through Precast and Prefabricated Bathroom Unit (PBU), Dry Mix, Environmental Services, and Engineering divisions.

The PBU division manufactures precast concrete components for building and infrastructure; and prefabricated bathroom unit/cabins for ships and buildings and marine fire doors.

The Dry Mix division manufactures and sells drymix plasters and mortars.

The Environmental Services division engages in the collection, management, recovery, and disposal of marine waste, oily/toxic waste, and industrial waste. This division also offers other oil-and-chemical services, such as cleaning and maintenance of oil interceptors, grease traps, and storage tanks; waste management consultancy services; tank rental services; and other waste recovery and environmental pollution control services, as well as markets and distributes fuels, lubricants, and greases.

The Engineering division manufactures container spreaders and bulk handling equipment. NSL Ltd also owns and manages raffles marina club; and trades in oil products. 

Based on the Triple S Scorecard (Present Price of $1.440): 

 Fail...
Why So Good?

Provide steel for prefab and precast industries - If you have read through my portfolio, you will understand that I have many steel companies in my portfolio. However, these firms' customers are mainly from the marine/oil/gas industry, which have been affected significantly by the recent low oil price. Therefore, with most of its customer coming from the prefab and precast industry, NSL Ltd will be not deeply affected by the low oil prices.

Different customer mix from other Steel Companies - In addition to the point above, NSL Ltd serves a different set of customers from the usual steel companies. Therefore, it will not be affected by the current set of marco factors in the oil industry. Even with the issues in the construction industry now, the fact that the company main customers are doing prefab and precast, which are mostly used for HDB flats, these issues will have minimum impact on its revenue.

High Cash Amount - The company has a high cash amount in its balance sheet. About 67% of the current asset is cash, which makes the current asset very liquid. This will provide NSL Ltd the ability to make the necessary investment immediately, if the need arises.

Why So Bad?

Heavy Capital Expenditure Annually - The company has been spending heavily on property, plant and equipment yearly. This has reduced its free cash flow and affected its dividend payment over the last 3 years.

Fail the Enhanced Triple S Scorecard - As shown above, the company has failed the Enhanced Triple S Scorecard. If you look deeper into the numbers of the Enhanced Triple S Scorecard, other than the low free cash flow which affected its Price to Free Cash Flow Ratio, you will see that the company do not have a high margin of safety as its book value is close to the current share price. Low dividend announced the last 3 years also affected its scoring in the Enhanced Triple S Scorecard.

In Short

Despite being interested in this stock due to the positive points above, I will not be investing in this stock because I already have many steel companies in my portfolio and this stock has a high share price, which meant a high opportunity cost for me (who has limited warchest).

A note to myself  is that maybe I should have look at this stock from the angle of investing in a Blue Chip, rather than the Enhanced Triple S Scorecard method (only those that attended the "1st Sharing Session with T.U.B will understand). However, based on NSL Ltd share price chart, the share price has been on an uptrend. Thus, as of now, I will still give it a miss.

Current Price: $1.440 as of 24 July 2016.

Please do your own due diligence before you invest in this stock.

Do note the author is not vested in this stock/company.

Anyway if you are thinking of investing in stocks for the long term, do give my initial Triple S Scorecard a try. It's still a good tool!

However, I will only be releasing the Enhanced Triple S Scorecard for those that attend My Sharing Session with T.U.B. The attendees of the 1st Sharing Session with T.U.B has all received it. If you are interested to attend the next Sharing Session, do not hesitate to contact me directly.

Oh... and do remember, please like our Facebook page - T.U.B Investing.

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