NCC Investment Report NTA November 2021

For the month of November, the NCC Investment Portfolio outperformed the benchmark XSOAI by +1.11% with the investment portfolio increasing by +0.80% and the benchmark decreasing by -0.31%. The NCC Investment Portfolio has now returned +13.10% p.a. since inception in February 2013, significantly outperforming the XSOAI which has returned +7.69% p.a. over this time. It was an eventful month across the NCC portfolio with Saunders International (ASX: SND) signing what we believe will be a company-defining contract for their business. Wingara Ag (ASX: WNR) released their first set of results under the stewardship of their new CEO, Gentrack Group (ASX: GTK) released a pleasing set of FY21 results and there were numerous Annual General Meetings (AGMs) held, with some providing more tangible and meaningful information than others.

SND announced what we believe to be a company defining contract for their business. The $165 million contract is by far the largest in SND’s history (by at least 3 times) and we believe this will be the first contract of scale where SND will provide Engineering, Procurement and Construction Management (EPCM) services to the end client. To give the above some perspective we believe SND now has the potential to deliver >$180 million in revenue in FY23 compared to just $66 million in FY20, of which >95% is organic growth. As with all contractors, execution will be key but we believe the disciplined nature (in regards to signing high risk contracts) of SND management, together with the new contract being focused on only one site, will significantly reduce any financial and execution risk. In our view, there is significant potential for SND to continue to win substantial contracts as no projects have yet been awarded in relation to the Federal Government's program to boost national diesel storage capability. SND has a market capitalisation of just $100 million together with a net cash balance sheet of $25 million, and we believe there is potential for FY23 NPAT to be >$11 million.

BSA Limited (ASX: BSA) made a couple of notable comments in their AGM presentation. Firstly, the refreshed strategy was articulated, with BSA aiming to be the market leader in “tech enabled workforce management”, through becoming the “go to bridge” between B2B customers and the large pool of skilled technicians in their national network. The company also stated that it expects to announce a capital raising in the near-term to fund an acquisition that will form a key part of this strategy going forward. Finally, BSA also stated that they are in advanced discussions with class action claimants to settle the action which was brought against the business over 3 years ago. Clearly, all of the above are significant events in their own right if they are able to be executed upon, and importantly each of these will go a long way to ensuring that BSA reaches its 3-year ambition of being a $750 million revenue business generating more than $50 million in EBITDA. However, in our view it is imperative that going forward the board and management of BSA can clearly articulate a long-term strategy and vision for the business, together with how this benefits their end customer and differentiates it from many, if not all of its peers. Such a strategy and vision, together with a disciplined capital management strategy and alignment will go a long way to restoring shareholder value and proving to the market the business has a stable organic growth profile going forward.