The share price of NWH is caught in a web not necessarily of its...

The share price of NWH is caught in a web not necessarily of its own making.

Breaking out of that web is not going to be easy and will take time. Shareholders need to continue to be patient as even sound (should I say satisfactory) trading results at next update announcement are not going to be enough to jolt the SP. Maybe a small lift for a few day.

The problem faced by NWH is all the negative news - the iron price, the projected iron ore glut, the slide in share price by the iron ore majors, deferring of capital expenditure, the sluggish overall sharemarket, industry sentiment etc. etc.

We can say that NWH isn't directly affected, that NWH is not an iron ore miner, NWH is a specialist in its field, is a proven performer or whatever, but the crux of the issue is that NWH is surrounded by negatives which it cannot control and I expect are going to persist for the next couple of years.

The iron ore problems won't be overcome in the short term. As we move forward we can expect to see the miners possibly undercutting or discounting one another to clear their ore (reports already exist that FMG is doing this). Production is increasing just as the ore price is decreasing. Not a good recipe. Some miners may need to cease production completely as they become unprofitable and those with high costs that persist may not survive.

The upshot of this for NWH is that there will be less opportunities to gain new contracts as miners scale back on their expenditure (especially new contracts). The miners will be looking to contain costs across the board.

Add to this the fact that competitors to NWH will be trimming their margins when quoting for new business and NWH will be quoting against this backdrop. Not to quote (or not to trim margins) could mean no new contracts and a substantial pullback in gross annual revenue. I believe this situation is not one that is limited only to Australia. The major miners outside Australia are pulling back on expenditure and if NWH looks outside Australia for new business it will find a hotly contested market with low margins.

The trends of the miners (especially those besides RIO and BHP) are being replicated by those companies on the periphery.

1/1/2014, 18/6/2014, Change

Iron ore US$130, US$89.30, (-) 31%


AGO 1.15, 0.63, (-) 45%
FMG 5.90, 4.02, (-) 31%
BHP 37.35, 35.28, (-) 5%
RIO 66.94, 57.90, (-) 13%
BCI 5.25, 3.03, (-) 42%

NWH 1.37, 0.94, (-) 32%
BKN 6.03, 3.49, (-) 42%
MND 18.60, 15.60, (-) 10%
ORI 23.39, 19.01, (-) 18%


In summary I see the SP of NWH as going nowhere fast. We can say that some of the above figures and companies have nothing to do with NWH, and that is my point. Despite that they are still impacting. To see the SP of NWH jump and turnaround significantly will require exceptional trading results, not just something a bit similar to (or marginally better than) the last announcement. I can't see that happening anytime soon.

I held NWH until earlier this year, have been sitting on the sidelines watching since then, and waiting for the right time to buy back in. The signs for me are all pointing in the wrong direction so am avoiding and now can't see things improving for several years.


DYOR - I am not a licensed investment advisor