NMDC Group, formerly National Marine Dredging Company (NMDC), based in Abu Dhabi, is a prominent player in the Middle East region. It engages in dredging, land reclamation, and marine construction services and boasts a rich clientele across the energy, maritime, tourism, environment, and urban development sectors. The company has a fleet of 98 marine support vessels and 36 dredgers at its disposal to support its operations. In August 2024, the company officially rebranded itself and adopted a new identity - NMDC Group, following the receipt of commercial license and completion of all the necessary approvals for the rebranding process. The rebranding exercise, which began in October 2023, aims to further the Group’s vision of growth in local, as well as global markets.

Post-merger synergy with NMDC Energy lifting the Group’s financial profile  

The Group has a global footprint and strategic presence across key geographies, spanning from the Middle East and North Africa (MENA) to South Asia and beyond. NMDC further broadened its prospects by merging its business with NMDC Energy (previously NPCC) in 2021, strengthening the Group’s operational capabilities and creating synergy. The merger has facilitated cross utilization of the fleet between the main business units, ensuring maximum utilization levels and creating cost synergy. The merger enhanced the Group’s financial profile, demonstrated through impressive performance delivered over FY21-23. During this period, the revenues surged by over 2x to reach AED16.7bn in FY23, whereas the net profit reached AED2.1bn, up from AED1.0bn in FY21.

In a strategic move in September 2024, NMDC has diluted 23% of the shareholding of its subsidiary, NMDC Energy, through the Initial Public Offering (IPO) route. The IPO was oversubscribed by 31.3x, indicating strong interest from retail participants (oversubscribed by 600x), and professional segment (oversubscribed by 16.7x). The shares were listed on the Abu Dhabi Securities Exchange (ADX) on September 11, 2024, at a price of AED2.8 per share.     

Encouraging results aided by UAE’s robust growth trajectory

In addition to the successful merger with NMDC Energy, the positive trajectory of UAE’s economy also contributed to the Group’s performance. As per data from the IMF World Economic Outlook (WEO), the UAE’s GDP is projected to outperform most of its peers, reflecting 4% growth in 2024 and rising to 5.1% in 2025. Backed by encouraging macro sentiments, NMDC continued to witness a positive financial performance trajectory, registering around 50% YoY growth in revenues to AED6.4bn in 3QFY24, driven by a robust project pipeline and strategic expansion across divisions. Net profit grew 16% YoY to AED731mn during the quarter.

The increase in top-line and bottom-line performance is complemented by a rise in order book backlog, which stood at over AED70bn as of September 30, 2024. This backlog provides revenue visibility in the medium term. In addition, NMDC looks poised to reap the benefits and grow its revenue on the back of robust development initiatives and strategic geographic expansion, further strengthening its leadership in the EPC and marine dredging sectors. On November 7, 2024, the company updated that it is participating in AED76bn worth of tenders. The conversion of some of these tenders would further fuel the expansion of the order book in the long-term.     

Initiation of dividend roll-out backed by robust cash profile

The post-merger synergy also boosted the cash profile of the Group. Cash and equivalents registered a substantial CAGR of 95.8% over the period FY19-23 to reach AED3.7bn. Long-term debt also increased in tandem to reflect at AED1.1bn in FY23 end, compared to AED149mn in FY19 end, however, it reduced from AED1.4bn reported in FY22 end, owing to repayments made during the year. The company’s financial profile further improved as of 3QFY24 end, with cash and equivalents growing to AED4.9bn and long-term borrowings decreasing to AED821.3mn. On the back of strong cash reserves, the board approved the distribution of special FY24 interim cash dividends of AED2bn (AED2.37 per share), which was paid on November 25, 2024. Additionally, the strong cash profile supports the management’s expansion plans in the coming years, both domestically and in overseas market.

Attractive valuation levels may spike investor interest  

NMDC’s current valuation remains attractive, compared to its peers and historical average. The company is trading at a P/E multiple of 6.5x (based on 2024 consensus estimated EPS of AED3.74), which is lower than the historical 3-year average of 12.4x. The valuation appears even more attractive when compared to the global peer average of 27.1x. Additionally, it is currently trading at an EV/EBITDA multiple of 4.4x (based on 2024 consensus EBITDA of AED4.2bn), which is lower than the historical 2-year average of 9.4x, and significantly lower than its global peer average of 15.6x. However, it has limited analyst coverage, with only one analyst providing a “Outperform” rating with a target price of AED33.2, indicating an upside potential of 36.5%.   

Overall, the company should be on the radar of investors supported by its positive fundamentals, post-merger successful integration with NMDC Energy, strong order book, strategic expansion into new projects and an attractive valuation. However, the Group is prone to risks of fluctuation in oil and gas prices, as its operations are heavily dependent on the oil and gas industry. Moreover, factors like ongoing geopolitical stress and inflation might trigger negative consequences for NMDC’s operations. Despite the presence of inherent industry and macro risks, the company has chartered a profitable path for itself, demonstrated by project wins across diverse geographies.