Nam Cheong

UOBKayhian on 27 Feb 2014

FY14F PE (x): 8.0
FY15F PE (x): 6.5

4Q13 net profit above estimates on one-off tax credits and higher other income. 4Q13
net profit of RM70m (+42% yoy) was well above ours and consensus expectations due
to tax credit of RM12m higher other income of RM5m (+424% yoy) and higher
shipbuilding revenue. Management noted that tax credits are one-off due to difference in
treatment of accounting profits and taxable income for 2007-12.

Maintain BUY with a higher target price of S$0.41 (prev S$0.36), as we roll forward our
valuations and peg it to 8.0x 2015F PE. Our target PE is 15% premium to peers’ longterm
mean of 7.0x, which we think is justified given Nam Cheong’s dominant 50-75%
market share in a high barriers-to-entry Malaysian OSV shipbuilding market. We also
raise our 2014-16F dividend pay-out assumptions to 27% similar to 2013’s.