Nam Cheong Ltd:
Cruising into a record-breaking year
Price Target: 12-month S$0.36
•Vessel sales contracts worth US$120m secured
•First direct sales to Latin American customer
•FY13 vessel sales set to surpass FY12 record levels
•Maintain BUY with TP of S$0.36
Four PSVs sold to a new customer in Latin America. Nam Cheong announced a significant vessel sales contract this morning worth US$120m for four Platform Supply Vessels to be delivered in FY14. The customer is an emerging offshore marine services company based in Latin America, and this is Nam Cheong's first direct sale to this region, though its vessels have been previously deployed there by other customers. These 3,200 dwt PSVs are high specs vessels with DNV-class and equipped with DP-2 system and diesel-electric propulsion. At US$30m each, the pricing is within expectations.
Well on track to achieve FY13/14 sales targets. With the sale of these four vessels, Nam Cheong has now sold 20 vessels worth a total of US$432m in FY13, and is well on track to beat the record of 21 vessels sold in FY12. In terms of vessel value, FY13 sales are already ahead. We estimate 18 of the 19 vessels scheduled to be completed in FY13 and about 13 out of the 25 vessels scheduled to be completed in FY14 have now been sold already. To recap, Nam Cheong has a bigger planned completion schedule of 25 vessels worth about US$520m in FY14. The group’s FY15 new building programme has not been disclosed yet but could likely be bigger than FY14.
2H13 earnings delivery will be a key catalyst. Apart from the built-to-stock series, Nam Cheong is also building four ERRVs for deployment in the North Sea and four MPSVs for Bumi Armada on a built-to-order basis. Their orderbook now stands at about RM1.7bn. This underpins robust estimated earnings CAGR of 17% for the Group in FY13/14. Given that the pace of vessel sales has been ahead of expectations YTD in FY13, there is potential for positive earnings surprises in 2H13. Maintain BUY with TP of S$0.36.
Publish date: 30/09/13