National Marine Dredging Company (NMDC) may be in the business of sucking up mud, but for investors the sludge might as well be gold. The stock spiked 8.4 per cent to Dh8.67 yesterday after the company reported that earnings last year grew 55.6 per cent from 2008. It was the stock's biggest one-day gain since December 29. Profits for last year grew to Dh413.2 million, up from Dh265.5m in 2008. It is easy to see why investors like the NMDC story. The dredging industry has a high barrier to entry: expensive equipment. So it appears the company has dug an effective moat for itself, to borrow a term from Warren Buffett, the US billionaire investor.
Best of all, the company can expect years, if not decades, of business in Abu Dhabi thanks to the emirate's ambitious 2030 development plan. In the next two decades, the emirate will spend hundreds of billions of dollars improving its infrastructure to support its oil and gas production, create new industries and possibly even reach its goal of making the capital a top international leisure destination.
NMDC, which is partly owned by the Abu Dhabi Government, stands to benefit from many of these initiatives, particularly those involving industrial development and tourism. In November, the Abu Dhabi National Oil Company awarded the firm a Dh2.3 billion contract as part of a project to build artificial islands in the Gulf to support drilling rigs. NMDC is also the prime contractor on the Musaffah Industrial Channel project, which will allow larger ships to deliver raw materials to local industry.
Other work includes extending the beach on the Abu Dhabi Corniche and enlarging the footprint of Sir Bani Yas Island, one of the desert islands being opened to tourists in Al Gharbia region. There is a good chance that when the Government develops more channels or tourist islands, it will look to its favourite dredging company. @Email:igale@thenational.ae
