Tuesday, August 20, 2013

Nam Cheong: Surge in shipbuilding activities (OCBC)

Nam Cheong:
Fair value S$0.35
add: 12m dividend forecast S$0.005
versus: Current price S$0.29

Surge in shipbuilding activities
• 2Q13 net profit jumped 81%
• Upswing in shipbuilding revenue
• Growth momentum intact

Nam Cheong Limited reported a strong pick-up in 2Q13 performance, with revenue and net profit climbing 84% and 81% YoY to RM275m and RM41m respectively. The surge was mainly driven by higher contribution from the shipbuilding segment. As a result, net profit attributable to shareholders jumped 81% YoY to RM41m. For 1H13, net profit was RM76m, forming 50% and 46% of ours and the street’s FY13F estimates. The outlook for Nam Cheong is positive, and the group is likely to benefit from an uptick in Malaysia’s offshore oil & gas activities over the medium term horizon. Maintain BUY with an unchanged S$0.35 FV.


2Q13 results within expectations
Nam Cheong Limited reported a strong pick-up in 2Q13 performance, with revenue and net profit climbing 84% and 81% YoY to RM275m and RM41m respectively. The surge was mainly driven by higher contribution from the shipbuilding segment. Other income remained stable at RM3m (-3% YoY), while finance costs increased 44% to RM1.6m, mainly due to interest expense and amortization of the MTN issuance cost. As a result, net profit attributable to shareholders jumped 81% YoY to RM41m. For 1H13, net profit was RM76m, forming 50% and 46% of ours and the street’s FY13F estimates.

Shipbuilding profit doubled
Nam Cheong’s 2Q shipbuilding revenue and gross profit surged to RM259m (+87% YoY) and RM45m (+110%) on the back of progressive recognition of the 7 PSVs sold. Shipbuilding gross profit margin remained stable at 17%. As of 13 Aug 2013, the group still has an order-book of 22 vessels with RM1.2b of revenue unrecognized. For its shipbuilding programme, vessels for delivery in 2013 are all sold, except for one PSV. For vessels due for delivery in 2014, 16 out of 28 vessels are unsold. Separately, 2Q chartering revenue and gross profit grew to RM16m (+45% YoY) and RM9m (+9%) respectively. It recently added an accommodation vessel to its charter fleet and we understand that the new vessel is already out on a long-term bareboat charter.

Positive outlook
Outlook for Nam Cheong is positive. Key demand drivers such as global rig counts and utilization are showing strength over the past one year. Within Malaysia, Nam Cheong, being the country’s largest OSV builder, is well-positioned to benefit from an uptick in offshore oil & gas activities. Its close ties with Petronas-licensed companies also give it a competitive edge in securing contracts. We continue to like Nam Cheong for its growth profile and keep our BUY rating and S$0.35 FV unchanged.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 16/08/13

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