"norfolk breaks ice"

Fin Review Headline today - "Norfolks breaks ice"
Fin Review reported positively on Norfolks latest $17.5ml Initial Contract win
Jamie Freed was the author.

Article was to the point and just a brief version of the actual news that Norfolk delivered to the market yesterday.
Encouragingly and of some significance here is the attention that the Fin Review is now applying to news on Norfolk

The contract win read very well. Highlighting the 5 year term and this being the initial contract to be completed by August. This is the type of relationship that the Norfolk Management have developed a reputation for and continues to support the Norfolk Board & Managements key strategies in developing recurring revenues and long term relationships with quality companies. In contracting terms these "Framework"arrangements are very favourable and as close to recurring income as can be achieved in a contract tendering environment.

This is the type of activity that will continue to attract the attention of institutional type investors, which is what has been happening recently.

Other considerations;
-PE low at 8.84 today (Peers average =just over 14x)
-ROE 25%
-Balance Sheet is Cash positive (no net debt) and the cash is growing
-Solid EPS growth
-Strong positive Cash flows
-Increasing recurring revenues
-Strong experienced & conservative Board & Management

-The company is very well positioned and is also winning contracts in the strong growth market of the resource and material sector. Norfolk has a wide reaching quality customer base (ex resources) over a wide industry spread.

-The company is in a very strong position within its demographic market with a substantially skilled and extensively qualified work force. (not easily replicated in the near future) and as such is very strongly positioned. Norfolk has developed a very solid reputation of delivering on it's contracts on time and on budget.

- Currently Norfolk's share register is very light on institutional investors. As the institutions become aware of this company and its very solid numbers, this will impact positively on Norfolks share price. Other positive factors will be both its earnings increase and PE expansion moving more in line with its peers (averaging 14x)

- Norfolks financials are very clean and easy to read and offer a lot of upside re rating opportunity. Currently Norfolk has moved under the radar of the institutions - more I think due to the size of the company.

- Another consideration is the 1st round of tendering for the big resource infrastructure spend doesn't include electrical/HVAC work, this wave is still coming as the projects get out of the ground. So look for the Electrical/HVAC Tendering activity to pick up as the first stages of these massive infrastructure spends get under way.

-Maui Capital at 20% is Norfolks largest shareholder. Maui is not a trade operator it is an investor and as such will at some stage enter into a Sale & purchase agreement.

-Discussions in the market place suggested $1.80 was an acceptable starting point for any negotiations. (Fin Review)

-It was reported that Maui fended off Monadelphous (Fin Review) - hence this potentially is where the price negotiations broke down- ($1.80) speculation on my part but does seem a reasonable conclusion.

-Maui are looking to achieve 3 x's or better than their original investment of $0.675 = $2.03 per share. This is the criteria that Maui has set for it's return in its "indigo Fund" which owns the Norfolk Shareholding.

-My current core intrinsic valuation for Norfolk is between $1.75 to just north of $2.00. Looking at the share price from a PE view and using an average of 14 x then NFK share price should currently be sitting at $1.93 which reinforces my valuation finding. Also using the "enterprise Value" method further reinforces.

It is easy to get carried away when applying estimations on where a share price should be, but I have only approached this from a factual numbers point of view and the company's outlook based on past performance results and not from where I would like the SP to be. In my opinion the current share price represents a sizeable discount that is not easily found in other stocks that I have researched.

If anyone else can add to this or balance out my view point, I would find this very helpful.