Friday, January 3, 2014

Nam Cheong: Every Good Story Has Its Twists (DMG)

Nam Cheong: Every Good Story Has Its Twists
(BUY, SGD0.315, SGD0.45)

As expected, NCL announced a series of contract wins bringing FY13’s total vessels sold to 24 – a new record. The surprising twist was that the expected PSV was not among the sales – replaced by a MWV and three AHTS vessels for a combined USD66m in value. The PSV’s delivery schedule has been amended at customer’s requests.

Maintain BUY, with SGD0.45 TP unchanged, based on 10x FY14F P/E. Big finish to FY13. NCL announced that a maintenance work vessel (MWV) and three Anchor Handling Tug Supply (AHTS) vessels have been sold for a combined USD66m, bringing its FY13 total to a record MYR1.5bn across 24 vessels (FY12: 21 vessels sold totalling MYR1.3bn). We estimate that the MWV was sold to Icon Offshore for USD28-30m, while the AHTS vessels went at USD11-12.5m each.

Twists and turns. In a surprising turn of events, we understand that it was the owners of other vessels sold that requested for earlier delivery of their purchases, thereby pushing the delivery of the platform supply vessel (PSV) originally scheduled for FY13 to FY14. Nevertheless, as a significant chunk of the MWV’s and AHTS vessels’ values will be recognised in 4Q13, our estimates remain unchanged. We also still expect the PSV to be sold and delivered in 1Q14.

Building up the chartering business. The three AHTS that were sold to its PT Bahtera Niaga Indonesia (BNI) associate will contribute towards building up NCL’s recurring charter income in the highly-lucrative Indonesian market. We estimate that net margins and ROEs on AHTS vessels in this market are both at > 40%. In the long run, NCL will benefit from having a dominant position in the offshore support vessel (OSV)-building market, as well as a more significant portion of income that incorporates higher visibility. This should comfort investors, and we believe that NCL’s valuations should gravitate towards owner-charterers like Jaya (JAYA SP, NEUTRAL, TP: SGD0.62) and Pacific Radiance (PACRA SP, NR) who enjoy P/Es of 10-12x.

Maintain BUY, with SGD0.45 TP unchanged. NCL’s story remains strong, and valuations are compelling at 7.3x FY14F P/E, supported by a 3-4% yield, a high 22-25% ROE and with > 25% growth annually.

Source/Extract/Excerpts/来源/转贴/摘录: DMG-Research,
Publish date: 02/01/14

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