▊ 3Q core EPS beat expectations by 62% and represents Nam Cheong’s strongest quarter since listing. The strength was led by the sale of four platform supply vessels (PSVs). Its share price could be catalysed by stronger-than-expected vessel sales and earnings strength, in our view. 9M core EPS forms 75% of our FY13 forecast, which is above since we are expecting a stronger 4Q with the sale of a 5,000 dwt PSV from its 2013 newbuild programme. We increase our FY13-15 EPS by 2-11% from revisions to the timing of its vessel sales and chartering earnings. We maintain our Outperform rating with a higher target price after rolling forward to 8x CY15 P/E (peers’ average) and upgrading our earnings.
PSV sales propelled 3Q
3Q’s earnings outperformance was spearheaded by the sale of four 3,2oo dwt PSVs. Shipbuilding revenue rose 142% yoy to RM320m as the four PSVs made up 43% of revenue. Further, the sales were more profitable than expected, with shipbuilding booking gross margins of 22.8% vs. our expected 18%. Meanwhile, gross profits from ship chartering grew 1.4x yoy to RM15m, thanks to the deployment of an additional AHTS and accommodation work vessel.
Another record year
Nam Cheong also surpassed its record vessel sales of US$425m (21 units) in 2012, booking 20 vessel sales worth US$431.5m in 9M13. Record sales this year should support a bumper 2014 (+18% yoy). Net order book is RM1.4bn with 25 vessels for delivery until 2015.
Exposure to Indonesia
Nam Cheong has tied up with Indonesia-based PT Bahetera Niaga Internasional, giving it exposure to the lucrative Indonesian waters. We understand that this JV owns and operates one small AHTS; and that contributions would be meaningful come 2015 as it expands its fleet. There could be upside as we have not factored in any contributions.
Publish date: 12/11/13