a very positive view on norfolk's fy13 result

FY12 result was $21 mn NPAT & $30.8mn EBIT
Update 21 August expects EBIT to exceed last years EBIT But NPAT to be impacted by 1st Half result

Back to FY13 as updated at the AGM in 25th July;
2013 NPAT growth of "at least 10% that is at least a $24.3mn result.
EBIT would have to be 30.8 plus 20% (allowing for normalised Tax rate this year) so expect $36mn EBIT

Then 22nd August; The update that down graded the upcoming 2013 half year result from $9.3mn (last years result) to between $4 to $6mn; But EBIT is still expected to exceed last years $30.8mn
This I have previously explained will be in my opinion due to the delay in starting the "Legacy Way" tunnel in Brisbane (which has now commenced tunnelling) and as such $3 to $4mn can be explained here which fits the updates envelope.

To keep it simple here I will just continue with a NPAT approach;
Expected result for FY13 was $24.3mn less $4mn as explained above = $20.3mn and is therefore below last years $22mn result.
It is important to observe here that Norfolk's half year update referred "that this will impact the full year result" (very understandable) but this of course is an impact on the $24.3mn not last years $22.1mn.

Goldman Sachs role in all this;
The Goldman Sach's analysts savaged the update by taking advantage of the opportunity to get themselves out of a tight spot when they "threw the baby out with the bath water" type approach which in turn panicked a lot of investors out of their positions with such an overly drastic cut to their target price. Goldman's methodology effectively added to the volatility (ie the analysts panicked themselves) and also attracted short sellers who have profited nicely a alongside funds which will have had to exit their positions mandatorily according to their rules. A very nice over selling combo.

Goldman's approach in revaluing NFK used the $22.1mn as their base, not the $24.3mn and then reduced their NPAT by $5mn to $17mn
As such we have witnessed a stock that has been savaged by an analysts way out of line and beyond the update provided by the company.
This is where confidence and credibility of the company's management and board come into play. For this I still do not have any evidence to change my view. Norfolk's EBIT expectation and order book also underpin this view.

So Goldman's say they expect a $17mn result this year (down from $22.1mn last year)
I say $20.3mn - of course Goldman outrank me

Now to add further "Fiscus" view of 3/5mn cost savings which in fact Norfolk are targeting $10mn this year adds further spice to the above. In fact this should see a forced review by Goldman, (and other brokers) What impact will this cost cutting and rationalisation of Norfolk's work force and brands have on the bottom line result? If you have confidence in the management team and they do achieve this saving then not only will the NPAT result be strong but also looking forward this is going to have an extremely positive knock on effect, both to future results but also M&A activity.
So my conclusion is the NPAT result for 2013 will exceed last years $22.1mn result. By how much could surprise!

Norfolk is exposed to a wide range of the business sectors/activities and while a lot are under a cloud there is also a lot of sectors in expansion to which Norfolk covers all.

Lastly Maui Capital have confirmed that they have had significant buyer interest this year, for their 20% stake but due to recent ASX volatility and NFK's SP decline recently, interest has stalled.
I have converted Maui's Indigo funds current valuation of NFK to be $1.23. Once again I can only reinforce my view that Maui Capital will be very keen to do a deal especially with Masfen and Perpetual right in behind them.