Nam Cheong Limited reported a solid set of 3Q13 results, with revenue surging 140.4% YoY to MYR341.2m and PATMI jumping 86.0% to MYR58.7m. This was the highest ever bottomline achieved by Nam Cheong since its RTO listing in May 2011. Revenue was in-line with our expectations but PATMI exceeded, with 9M13 revenue of MYR851.3m (+71.1%) and PATMI of MYR135.2m (+54.9%) forming 72.4% and 83.4% of our FY13 forecasts, respectively. Looking ahead, we believe that Nam Cheong will be able to leverage on the robust industry outlook to capitalise on growth ahead. We rework our financial model and assumptions following a change in analyst coverage, and derive a new fair value estimate of S$0.37 (previously S$0.35) on Nam Cheong, which is premised on 8.5x FY14F EPS (representing one standard deviation above its historical average forward PER). Maintain BUY.
3Q13 PATMI exceeded expectations
Nam Cheong Limited reported a solid set of 3Q13 results, with revenue surging 140.4% YoY to MYR341.2m and PATMI jumping 86.0% to MYR58.7m. This was the highest ever bottomline achieved by Nam Cheong since its RTO listing in May 2011. Revenue was in-line with our expectations but PATMI exceeded, with 9M13 revenue of MYR851.3m (+71.1%) and PATMI of MYR135.2m (+54.9%) forming 72.4% and 83.4% of our FY13 forecasts, respectively. This strong set of results was driven by both its Shipbuilding and Vessel Chartering divisions. The former saw a 141.9% YoY increase in revenue to MYR319.7m for 3Q13, while the latter’s revenue jumped almost threefold to MYR21.5m.
Robust industry outlook to drive growth ahead
Looking ahead, the increase in demand for rigs and replacement cycle of older OSVs depicts a robust outlook for Nam Cheong, in our view. We believe this positive trend has underpinned Nam Cheong’s strong order book growth, which now stands at MYR1.7b, of which MYR1.4b remains unrecognised (as at 30 Sep 2013). Nam Cheong remains confident of the demand for small and mid-sized AHTS as well as mid-sized PSVs. According to management’s internal estimates, Nam Cheong commands 12% of the global OSV market share (in terms of vessels constructed) and it aims to grow this figure by enhancing its design capabilities for the vessels under its shipbuilding programme.
Reiterate our BUY rating
We rework our financial model and assumptions following a change in analyst coverage. We now forecast Nam Cheong to record a sturdy 46.9% and 37.1% increase in its revenue and PATMI for FY13, followed by another 31.9% and 24.3% growth in FY14, respectively. Ascribing a 8.5x target peg (representing one standard deviation above its historical average forward PER) to our FY14 projections, we derive a new fair value estimate of S$0.37 (previously S$0.35). Maintain BUY.
Nam Cheong Limited reported a solid set of 3Q13 results, with revenue surging 140.4% YoY to MYR341.2m and PATMI jumping 86.0% to MYR58.7m. This was the highest ever bottomline achieved by Nam Cheong since its RTO listing in May 2011. Revenue was in-line with our expectations but PATMI exceeded, with 9M13 revenue of MYR851.3m (+71.1%) and PATMI of MYR135.2m (+54.9%) forming 72.4% and 83.4% of our FY13 forecasts, respectively. This strong set of results was driven by both its Shipbuilding and Vessel Chartering divisions. The former saw a 141.9% YoY increase in revenue to MYR319.7m for 3Q13, while the latter’s revenue jumped almost threefold to MYR21.5m.
Robust industry outlook to drive growth ahead
Looking ahead, the increase in demand for rigs and replacement cycle of older OSVs depicts a robust outlook for Nam Cheong, in our view. We believe this positive trend has underpinned Nam Cheong’s strong order book growth, which now stands at MYR1.7b, of which MYR1.4b remains unrecognised (as at 30 Sep 2013). Nam Cheong remains confident of the demand for small and mid-sized AHTS as well as mid-sized PSVs. According to management’s internal estimates, Nam Cheong commands 12% of the global OSV market share (in terms of vessels constructed) and it aims to grow this figure by enhancing its design capabilities for the vessels under its shipbuilding programme.
Reiterate our BUY rating
We rework our financial model and assumptions following a change in analyst coverage. We now forecast Nam Cheong to record a sturdy 46.9% and 37.1% increase in its revenue and PATMI for FY13, followed by another 31.9% and 24.3% growth in FY14, respectively. Ascribing a 8.5x target peg (representing one standard deviation above its historical average forward PER) to our FY14 projections, we derive a new fair value estimate of S$0.37 (previously S$0.35). Maintain BUY.
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