According to Osman, this was attributed to a 25.3% y-o-y drop in cost of sales to $47.2 million from the reversal of $3 million in unused project contingency provisions from the completed Malaysia projects and a 75% y-o-y decline in finance cost to $0.3 million in 2HFY2025 from debt repayment and lower interest rates.
As project-based revenue is contingent on the timing of contracts awarded, Osman believes there will be an uplift for Nordic Group once the sales pipeline converts to orders.
“Currently, total sales pipeline amounts to over $305 million, with project services making up the majority at $260 million (85%), while maintenance services make up $46 million (15%),” states Osman. Defence leads the pipeline of projects and typically converts into long-term maintenance contracts upon project completion, given the specialised nature of the work.
From Osman’s perspective, the pipeline composition indicates a strong upcycle in higher-margin project services revenue that can further improve margins.
See also: DBS Group Research sees Innotek ‘scaling into the AI hardware value chain’ in un-rated report
With that, the analyst reduces the FY2026 forecast PATMI by 5% to account for gestation period before pipeline contracts convert and project-based revenue scales and potentially higher effective tax rate as Malaysia’s tax loss buffer is fully utilised as of FY2025.
“We maintain a “buy” rating with an unchanged target price of 63 cents. Currently, Nordic Group is trading at 8.4 times FY2026 P/E ratio. The company is riding an upcycle in new projects from defence, batteries, marine and the semiconductor sector, which we expect to drive earnings growth,” concludes Osman.
For Troy Cheng of OCBC Group Research, he sees Nordic Group’s solid contract wins will help to support growth momentum.
See also: PhillipCapital bumps up target price on Thakral following positive FY2025 results
In his Mar 6 report, he points out that Nordic Group’s order book expanded to $201.9 million as at end of FY2025, supported by a notable uplift in maintenance contracts, which provide a more recurring and stable income stream.
“The book-to-bill ratio improved to 1.32 times, signalling strong demand visibility and underpinning potential revenue contribution for the next two financial years. Coupled with $119 million in contract wins across FY2025 and spanning deliveries through 2028, the group remains well positioned to sustain steady topline momentum,” says Cheng.
At the same time, Cheng mentions that Nordic Group’s more than four decades of relationship with leading memory and semiconductor manufacturers will help provide a strong foundation for future growth, given the ongoing semiconductor tailwinds.
“This positioning has become more meaningful as Micron is preparing to invest US$24 billion in its Singapore wafer fabrication facilities. The expansion reinforces Singapore’s importance as a global semiconductor hub and supports a stronger demand outlook for engineering service providers such as Nordic Group,” Cheng states.
From Cheng’s perspective, against this backdrop, Envipure positions Nordic Group well to benefit from the expansion cycle, as it supplies hydraulic and water treatment systems that are essential in advanced semiconductor facilities.
“This creates potential for new project awards as well as recurring maintenance work. Even as Micron’s new facility is expected to begin operations only in 2HFY2028, suggesting a medium-term earnings impact, the strengthening demand environment already enhances Nordic’s visibility and strategic positioning within the semiconductor ecosystem, in our view,” Cheng adds.
As such, Cheng is reiterating his “buy” call with a higher fair value estimate of 60 cents for Nordic Group, up from 59 cents previously. The fair value is supported by an attractive upside potential of around 30% with the counter offering a decent FY2026 dividend yield of 4.6%, according to Cheng.
“We apply an unchanged target P/E ratio multiple of 11.3 times to our forecasted FY2026 EPS of 5.28 cents,” concludes Cheng.
As at 10.20am, shares in Nordic Group are trading 0.5 cents lower or 1.08% down at 45.5 cents.
